GBP/USD: Job uncertainty and deteriorating Sino-American relations jitters sterling

GBP/USD has been falling amid safe-haven dollar flows as Sino-American tensions remain elevated. What’s more, fears about mass UK firings are weighing on the pound, FXStreet’s analyst Yohay Elam reports.

Key quotes

“Britain’s labor market is holding up well thanks to the government’s successful furlough scheme. That emergency program has likely kept unemployment depressed in June. Tuesday’s labor figures are set to paint a rosy picture – despite the hardship inflicted by the COVID-19 crisis.” 

“The latest surge in safe-haven demand is coming from China’s announcement that it will sanction US officials. The Chinese move came in response to Washington’s sanctioning of Hong Leader Carrie Lam. The world’s largest economies are also at loggerheads over Taiwan. China sent a fighter jet briefly across the median line of Taiwan Strait – expressing its anger to US Health Secretary Alex Azar in Taipei. Negotiators will meet late in the week to take stock of the trade deal.” 

“The greenback is benefiting from the ongoing fiscal impasse in Washington. President Trump sought to break the deadlock by signing four executive orders, providing unemployment benefits and other support. His move – which may not have legal backing – may push Republicans and Democrats to strike a deal. However, the recent decline in the US coronavirus case curve and the upbeat jobs report could cause complacency among policymakers.”