GBP / USD recovers to 1.3800 amid end-of-quarter USD selloff

GBP / USD rallied to the 1.3800 level on Wednesday amid the USD sell-off at the end of the quarter.
US data has been in the spotlight; a decent ADP number and a Chicago PMI survey that didn’t help the USD.
In the UK, the second estimate of GDP data for the fourth quarter of 2020 was slightly better than expected.

USD weakness has allowed GBP / USD to rally to the 1.3800 level on Wednesday. Currently, the pair is trading higher gaining around 0.4% or close to 60 pips on the day, although it still remains a bit off this week’s highs at 1.3845.

Performance of the day

The USD bulls appear to have run out of steam after what has been a very strong month (the DXY is set for its best monthly gains since July 2019 of 2.4%). Surpassing the 93.50 mark appears to have been too much of a key psychological hurdle, with traders opting instead to post some gains rather than the month and end of the quarter.

A solid estimate of the number of jobs added to the US economy in March from ADP and a Chicago PMI survey for the same month failed to lift USD confidence. Starting with the first: Data from the payroll company indicated that 517,000 jobs were gained in the month, slightly below expectations that ADP data will show 550,000 jobs. It goes without saying, though, that over half a million in earnings from work is pretty impressive. If Friday’s official labor market report confirms half a million in labor earnings, that would put total non-farm employment at roughly 143.5 million, more than 13.5 million above last April’s lows of 130 million, but still substantially down. below pre-pandemic levels of approximately 152.5 million in total employment in the country.

Note that while ADP has not been particularly accurate in predicting the official NFP number over the past few months, it has helped indicate the trend; that is, ADP accurately predicted the stagnation in the rate at which jobs have been gained in the US through late 2020 and early 2021, and may now be pointing towards the expected job recovery in the coming weeks. Wednesday’s ADP data should inspire confidence in the market consensus prediction that 650,000 jobs will be added to the US economy in March.

Turning now to the Chicago PMI, the general index rose to 66.3 from 59.5 in February, well above expectations for an increase to 60.7. The strong data comes in the wake of a number of other strong manufacturing surveys for the month of March, be it the Fed’s regional surveys or last week’s preliminary PMI report from Markit and adds further upside risk to Market expectations that Thursday’s leading ISM Manufacturing PMI will come. at 61.3. Despite showing no positive reaction to the above, the dollar showed some minor signs of weakness following a February release of pending home sales that was significantly worse than expected; Pending sales fell 10.6% for the month, much higher than the expected drop of 2.6%.

Meanwhile, and continuing with the data theme, the UK’s second quarter 2020 GDP estimate was better than expected, showing that the economy is growing at a 1.3% quarter-on-quarter rate, quite good given that the The economy spent most of the quarter under a relatively severe lockdown. restrictions and showing that the economy has become more resistant to lockdown as time has passed since the start of the pandemic (this bodes well that first quarter 2021 GDP is not as bad as some fear).

For the remainder of the session, United States President Joe Biden and United States Secretary of the Treasury Janet Yellen will be ready after 21:00 BST to present his economic vision and Biden is expected to reveal the details of your administration’s infrastructure spending plans.