British Pound and FTSE Remain Stable Following Labour Landslide; Focus Shifts to US Non-Farm Payrolls

• BY RichardMiles
• July 5, 2024
• 0 Comments

British Pound and FTSE Remain Stable Following Labour Landslide; Focus Shifts to US Non-Farm Payrolls. The Labour Party is set to take residence at No. 10 Downing Street later this morning, following their landslide victory in the UK general election. With nearly all seats declared, Labour has secured 410 of the 650 available seats, marking a significant increase of over 200 seats compared to 2019. Meanwhile, the incumbent Conservative party has been reduced to just 119 seats, a staggering decline of 248 seats from the previous election. While Labour’s victory was anticipated, the Conservative losses, including several prominent figures, signal a seismic shift in UK politics. UK financial markets have been anticipating a substantial Labour majority since the election was announced, and today’s tepid opening reflects this sentiment. The British Pound shows minimal movement against major currencies, while the FTSE 100 is marginally up by around 0.2%. Financial markets typically favor political stability, which is expected to bolster sentiment as investors await forthcoming policy announcements. GBP/USD DAILY PRICE CHART Charts using TradingView Later today, the latest US Jobs Report (NFPs) will be unveiled, a crucial monthly data release closely monitored by the market. The US Labor Department is expected to announce the creation of 190,000 new jobs in June, a decrease from the robust 272,000 added in May. This year, three out of the initial four employment reports have been revised downward, continuing a trend seen last year where eight out of twelve initial estimates were adjusted lower. The US dollar index is currently testing trend support, a previous peak, and both the 20-day and 50-day simple moving averages. A disappointing NFP reading today might prompt the DXY to challenge the 200-day simple moving average just above 104.50. The US dollar index (DXY) is currently navigating through a pivotal phase in its price action, as it interacts with multiple key technical levels and awaits the crucial Non-Farm Payrolls (NFP) report due later today. The index, which measures the strength of the US dollar against a basket of major currencies, finds itself at a convergence point of various indicators that could dictate its near-term direction. US DOLLAR INDEX DAILY CHART Charts using TradingView Firstly, the DXY is testing trend support, a critical level that typically signifies the lower boundary of its recent price movements. This trend support is not only important from a technical standpoint but also psychologically, as traders and investors often look to such levels for potential reversals or continuations in market trends. Secondly, the index is approaching a prior swing high, a level that had previously acted as a resistance and could now serve as support if the DXY retraces from current levels. This historical price action is closely monitored by technical analysts who use past price behavior to forecast future movements. Additionally, the DXY is currently flirting with both the 20-day and 50-day simple moving averages (SMAs). These moving averages are widely followed indicators that smooth out price data over specific time periods and are often used to gauge the short to medium-term trend direction. The fact that the DXY is interacting with these SMAs suggests a potential inflection point where market participants may reassess their positions based on the index’s proximity to these key averages. Today’s focus, however, is largely centered on the release of the US Non-Farm Payrolls (NFP) report. This economic data point, released monthly by the US Labor Department, provides a comprehensive snapshot of the employment situation in the United States, including the number of new jobs created or lost in non-farm sectors, the unemployment rate, and average hourly earnings. The NFP report is one of the most closely watched economic indicators globally and has a significant impact on financial markets, particularly currency markets. Market expectations for today’s NFP report anticipate the creation of approximately 190,000 new jobs in June. This forecast represents a decrease from the robust 272,000 jobs added in May, reflecting potential moderation in the pace of US labor market recovery. However, it’s essential to note that economic forecasts are subject to revisions based on subsequent data releases, and actual outcomes may differ from initial expectations. Furthermore, recent trends in NFP data revisions underscore the importance of remaining attentive to potential adjustments. Historically, initial estimates for US employment figures have often been revised in subsequent months, influencing market sentiment and trading strategies. Understanding these dynamics is crucial for traders and investors who seek to navigate volatility and capitalize on market opportunities. FTSE 100 DAILY PRICE CHART Charts using TradingView In the event that today’s NFP reading falls below the consensus forecast of 190,000 jobs, market participants may interpret this as a signal of potential economic weakness or slower-than-expected recovery in the labor market. Such an outcome could weigh on the US dollar, as traders adjust their expectations regarding the Federal Reserve’s monetary policy stance and the trajectory of interest rates. From a technical perspective, a lower-than-expected NFP reading today could exert additional downward pressure on the DXY, potentially pushing it towards testing the 200-day simple moving average (SMA) positioned just above the 104.50 level. The 200-day SMA is considered a longer-term trend indicator, and a breach below this level could signal a deeper correction or change in trend direction for the US dollar. Conversely, a stronger-than-expected NFP report could bolster confidence in the US economic recovery narrative, potentially supporting the US dollar and leading to a bounce or consolidation around current technical levels. Traders will closely monitor market reactions to the NFP data release, looking for confirmation or deviation from pre-existing market expectations. In summary, the US dollar index is currently at a critical juncture, facing multiple technical challenges and awaiting the influential NFP report. The outcome of today’s data release will likely shape near-term market sentiment and provide insights into the US economic outlook, influencing trading strategies across global financial markets. As such, market participants are advised to stay informed, remain adaptable to evolving conditions, and exercise prudent risk management practices in response to potential market volatility.