Pound Yawns As Construction PMI Almost Unchanged

 | Dec 02, 2016 07:16AM ET

GBP/USD has posted slight gains in the Friday session. Currently, the pair is trading at 1.2620. On the release front, British Construction PMI was almost unchanged, with a reading of 52.8 points. This beat the forecast of 52.3 points. In the US, employment indicators will be in the spotlight on Friday, highlighted by US Nonfarm Payrolls and the Canadian Employment Change. Traders should be prepared for volatility in the currency markets in the North American session.

British PMI reports were solid this week, pointing to slight expansion in the construction and manufacturing reports. Fourth quarter numbers have been respectable, as the economy continues to defy the doomsayers who predicted a huge toll from the Brexit vote. Still, are rough seas ahead, as Britain must negotiate the terms of its departure from the European Union. Earlier this week, Brexit Minister David Davis sent the markets a reassuring message, stating that Britain would consider paying for access to the European single market.

Friday’s spotlight is on US employment reports. The US labor market has been red-hot and is close to capacity. Solid job numbers have boosted market expectations for a rate hike next week, which is considered a virtual certainty (the markets have priced in a rate hike at over 90%). Traders will want to keep a close eye on today’s indicators, as any unexpected readings can have a sharp impact on the currency markets.

We could see mixed numbers, with Nonfarm Payrolls expected to improve to 177 thousand, while Average Hourly Earnings, which measure wage growth, is expected to dip to 0.2%. On Thursday, unemployment claims were unexpectedly high, climbing up to 268 thousand, the highest level since July. Still, the 4-week averages continue to point to very low levels for jobless claims.

NFP Still Important Despite Upcoming Rate Hike

GBP/USD Fundamentals

Friday (December 2)

  • 4:30 British Construction PMI. Estimate 52.8. Actual 52.3
  • 8:30 US Average Hourly Earnings. Estimate 0.2%
  • 8:30 US Nonfarm Employment Change. Estimate 177K
  • 8:30 US Unemployment Rate. Estimate 4.9%
  • 8:45 US FOMC Member Lael Brainard Speech
  • 13:00 US FOMC Member Daniel Tarullo Speech

*All release times are EST

* Key events are in bold

GBP/USD for Friday, December 2, 2016