British Pound Punches Past 1.30 as Greenback Softens

GBP/USD has posted strong gains on Thursday, recovering from losses earlier in the week. In the North American session, the pair is trading at 1.3030, up 0.70% on the day. On the release front, there are no major British events. In the U.S, unemployment claims dropped to 207 thousand, better than the estimate of 214 thousand. On Friday, the focus will be on employment data, as the U.S releases wage growth and official nonfarm payrolls.

Prime Minister May has been fighting off domestic and external adversaries for weeks, so a well-received major speech may have saved her job at 10 Downing Street, at least for now. May addressed an enthusiastic crowd at the Conservative party conference on Wednesday, declaring that she very much wanted a Brexit deal with Europe, but not at any price. May has been unsuccessful in trying to sell her “Chequers” proposal to the EU, and many Conservative party members feel her proposal leaves Brussels in charge of much of Britain’s economic policy. With a March 2019 deadline for Brexit, major gaps remain between the UK and the EU, such as what kind of border arrangements will be put in place between Northern Ireland and Ireland. Europeans leaders such as French President Emmanuel Macron have openly said that Britain must pay a price to leave the club, and there is growing concern that the two sides will be unable to reach an agreement before the March deadline. Such a scenario would be a nightmare for British businesses and could send the pound into a tailspin.

U.S job numbers continue to look sharp, reflective of a red-hot labor market. Unemployment claims dropped from 214 thousand to 207 thousand. This release comes on the heels of ADP nonfarm payrolls, which jumped 230 thousand in September. This marked the strongest increase in private sector jobs since March. Can the labor market keep up its dizzying pace? We could see some soft numbers as early as Friday, based on markets forecasts. Wage growth is expected to drop from 0.4% to 0.3%, while nonfarm payrolls is forecast to fall from 201 thousand to 185 thousand. Traders should be prepared for some movement in the currency markets during Friday’s North American session.