- GBP / USD failed to sustain modest intraday gains inspired by UK PMI at 1.4200.
- A combination of factors continued to prop up the USD and limited the pair’s rise.
- The better-than-expected US ADP report, jobless claims did little to provide a significant boost.
The pair GBP/USD It struggled to capitalize on its positive intraday move and has now lost more than 50 pips from the daily highs. The pair has now fallen to the lower end of its daily trading range and was last seen hovering around the 1.4100 level after the US ADP report.
The pair reversed an intraday decline and built on the previous day’s bounce from around 1.4100. The intraday bullish move was led by the bullish UK services PMI, which was revised up to 62.9 for May versus 61.8 flash estimates. The data added to the optimistic outlook for the UK economic recovery and provided a modest boost to the British pound.
The pair rallied more than 50 pips from lows hit early in the European session, though it struggled to capitalize on the move above 1.4200 amid a modest strength in the US dollar. Investors have started to get nervous amid speculation that the stronger economic data coming in could force the Fed to start cutting its bond buying program. This, in turn, led to a short hedge around the dollar.
The USD was also supported by a modest rally in US Treasury yields and a sharp pullback in US equity markets. Apart from this, a stronger than expected ADP report on US private sector employment further held the ball and turned out to be a key factor behind the last leg to the downside during the early days of the US session, although the decline is likely to remain limited.
Automatic Data Processing (ADP) reported Thursday that US private sector employers added 978,000 jobs in May, far more than the 650,000 anticipated. The upbeat figure, to some extent, was offset by a downward revision of the previous month’s reading to 654,000 from 742,000 previously reported. Separately, initial US weekly jobless claims fell to 385,000 in the last week from 405,000.
However, the market reaction to the data turned out to be subdued as the focus remains on Friday’s release of the monthly jobs report (NFP), which has been closely followed. This would boost expectations for the next FOMC meeting later this month, which will play a key role in influencing short-term USD price dynamics and provide further directional momentum to the GBP / USD pair.