GBPUSD Moves Amid Trade Wars Jobs Data And Brexit Talks

The FTSE declined steadily across the day, weighed down by sentiment as the trade war gun is fired between US and China. Resource stocks dominated the lower reaches of the FTSE as investors digested the US imposing the first round of trade tariffs on China and China, the world’s largest consumer of metals, responding in kind.

After peaking at 7631, then FTSE is back below 7600 with risk off sentiment expected to continue into the weekend. A fall of 0.4% is not that drastic considering the threats that continue to pour out of the White House, escalating US-Sino tensions further; however, this story has also been around for a considerable amount of time now, there is no surprise element, that the two sides are marching head on into a trade war and this has helped limit loses so far.

Mixed non-farm payroll sends dollar lower & stocks higher

Helping limit losses on the FTSE has been a push higher in US stocks following the US jobs report. The non-farm payroll headline figure best expectations, with 213k new jobs being create in June, ahead of the 195k expected.

Unemployment also unexpectedly ticked higher back up to 4% after falling to an 18-year low in May of 3.8%. However, the big news was the miss on wages growth.

As with previous reports, as the labour market is tight traders have been paying more attention to average wage growth, given its potential to lift inflation and interest rate expectations. Average earnings remained constant in June at 2.7%, lower than the forecast 2.8%. Whilst the Fed had lifted its path of expected rate rises to 4 across the year, at the June meeting, the markets have been less convinced when pricing this in.

Today’s miss on the wage has cast further doubt on the Fed’s ability to hike twice more this year. The dollar dropped following the release trading 0.5% lower versus a basket of currencies, whilst stocks have rallied on optimism of borrowing costs remaining steady.

Brexit talks to boost pound?

The pound is trading higher versus the weaker dollar as investors now turn towards Theresa Mays Brexit cabinet meeting in PM’s county residence. Optimism is growing that she will try to push through a softer version of Brexit potentially infuriating hard line Brexiteers.

Whilst there are unlikely to be any headlines during the meeting, volatility in the pound when it starts trading on Sunday is expected.

Traders will be looking carefully as to whether or not she manages to unite her cabinet and whether the soft Brexit is a possibility. Should she achieve this, the pound could open higher after the weekend pulling $1.34 into focus.

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