GBP/USD off daily lows as US unemployment rate unexpectedly rises in July

British pound bounced from daily lows against the US dollar on Friday, after non-farm payrolls in the United States increased less than anticipated and the rate of unemployment climbed in July. The sterling came under selling pressure earlier today, as manufacturing activity in the United Kingdom disappointed expectations.

Having touched a daily low at 1.6814 at 13:29 GMT, a level unseen since June 12th, GBP/USD managed to regain ground, climbing to 1.6862. At 12:42 GMT the pair was losing 0.36% for the day to trade at 1.6826.

US Employment

Employers in US private sector added 209 000 jobs last month, missing preliminary estimates, which pointed to a job gain of 230 000. July has been the sixth consecutive month, when job positions grew more than 200 000, or the longest such period since 1997. In June the total number of US employees in any sector, with the exception of farm employees, general government employees, employees of non-profit organizations and private household employees, grew to 298 000, a revision up from the previously reported 288 000. Companies operating in construction and factories were among those, which added more to payrolls last month compared to June. Job gains slowed down in sectors such as retail trade, business services, education and health services.

The rate of unemployment in the country, however, rose to 6.2% in July from 6.1% in the prior month, as labor force expanded.

Average hourly earnings remained unchanged at $24.45 in July, while rising 2% during the past 12 months.

Manufacturing in the UK

The gauge of manufacturing activity in the United Kingdom for July plunged to its lowest level this year, after a drop in new orders and output ended the first half’s “stellar growth spurt”, according to Markit Economics. The manufacturing Purchasing Managers Index fell to a reading of 55.4 last month from a revised down 57.2 in June, the official report by the Chartered Institute of Purchasing and Supply (CIPS) in cooperation with Markit revealed earlier today. Experts had projected a slowdown to 57.2 in July from a previously reported 57.5 in June.

The sub-index of new orders dropped to 57.8 last month from 60.6 in June, accompanied by a fall in the sub-index of output. Factory payrolls rose at the slowest pace in 9 months, despite that business entities added job positions for a 15th month in a row. Prices of output surged for a 13th consecutive month.

“Although cooling in July, growth rates for production and new orders remain well above their long-run trends, supporting continued solid job creation,” said Rob Dobson, an economist at Markit in London, cited by Bloomberg. “The rate of growth remains historically very strong to help contribute to yet another robust expansion of the economy in the third quarter.”

Manufacturing data may lead to certain concerns over the potential rate hike by Bank of England. The central bank may be urged to wait a little bit longer before raising borrowing costs from the current all-time low of 0.50%. Market players are betting that the benchmark rate will probably be raised by 25 basis points (0.25%) by February next year, Bloomberg reported.

GBP/USD lost 0.34% on a daily basis to reach 1.6834 in the minutes, following the release of this data.