Pound Sterling jumps to near 1.3200 as US private payrolls growth slows.

The Pound Sterling gains against the US Dollar on lower US job vacancies and a slowdown in private employment growth.
US ISM Services PMI expanded at a faster pace unexpectedly in August.
Investors see the BoE leaving interest rates unchanged at 5% at this month’s meeting.

The Pound Sterling (GBP) surges to near 1.3180 against the US Dollar (USD) in Thursday’s North American session. The GBP/USD pair extends Wednesday’s recovery as weak United States (US) ADP Employment Change data for August adds to evidence that labor market conditions deteriorate further. An unexpected decline in the private payrolls data also sent the US Dollar (USD) on the back foot.

The agency reported that private employers hired 99K job-seekers in August, while investors projected higher payrolls at 145K from July’s reading of 111K, downwardly revised from 122K. Signs of a slowing job market supported expectations that the Federal Reserve (Fed) could start the policy-easing process aggressively.

According to the CME FedWatch tool, the possibility for the Fed to begin reducing interest rates by 50 basis points (bps) to 4.75%-5.00% in the September meeting has increased to 47% from the 34% recorded a week ago.

Going forward, the US Nonfarm Payrolls (NFP) data for August, which will be published on Friday, will be the major trigger for the US Dollar. The importance of the US labor market data has increased significantly as the Fed appears to be more concerned about preventing job losses as there is increasing evidence that inflationary pressures remain on track to sustainably return to the bank’s target of 2%.

However, the US Dollar has found interim support after a downside move as the US ISM Services Purchasing Managers’ Index (PMI) for August surprisingly came in stronger than the former release. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, finds support near 101.00 after a sharp downside move. The ISM agency reported that activity in the services sector expanded at a slightly faster pace to 51.5 from July’s reading of 51.4. Economists projected the Services PMI to have grown at a slower pace to 51.1