GBP/USD falls below 1.2100 after US NFP report.

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  • GBP/USD is set to end the week with heavy losses of 0.78%.
  • US labor data poured a jug of cold water on recession fears ahead of next week’s CPI.
  • BoE Pill: The bank will reach its inflation target, but “it will take some time”.

The pair GBP/USD hit a new weekly low of 1.2002 in reaction to a positive US jobs report, which allays US recession fears while raising the odds of further aggressive Fed tightening amid 9% inflation in the country.

During the day, GBP/USD reached a high around 1.2169, but, as mentioned, fell. The GBP/USD pair is still trading at 1.2078, shedding 0.67%, although some 70 points above the day’s low.

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GBP/USD tumbled after the US data.

Sentiment remains mixed as most EU stocks closed lower while US stocks falter. On Friday, the Labor Department revealed that nonfarm payrolls for July added 528,000 jobs to the US economy, beating estimates of 250,000. Additional data from the US jobs report illustrates that the labor market remains tight, with the unemployment rate falling to 3.5% and median hourly earnings rising 0.5% mom, while on an annual basis, they increased by 5.2%.

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On Thursday, Cleveland Fed President Loretta Mester maintained her hawkish stance. She said the rate path charted by June’s dot charts is “more or less correct,” while adding that a 75 basis point rate for September “is not unreasonable.”

Separately, Bank of England Chief Economist Huw Pill made a statement via Bloomberg. He said the BoE would return to its 2% inflation target, but added “it’s going to be a process, it’s going to take time, reflecting the magnitude of the shocks we’ve seen” on Friday. These remarks came a day after the “old lady” raised rates by 50 basis points, the biggest hike in 27 years, raising the Bank’s rate to 1.75%, and warned that the UK could enter a recession at End of the year.

With that said, GBP/USD is set to end the week with losses. The resilience shown by the US economy so far, with ISM PMIs keeping the strong in expansionary territory and a strong labor market, paints a positive picture for the USD. On the contrary, the scenario of stagflation that is looming in the United Kingdom, allows us to conclude that the weakness of the pound sterling could continue into next week.

What must be considered

Next week, the UK economic docket will feature the RICS house price balance as the only data that will move the market. In the United States, data on inflation, consumption and production indices, initial jobless claims and consumer sentiment from the University of Michigan for August will be released.

GBP/USD key technical levels

GBP/USD

Panorama
Last Price Today 1.2039
Today’s Daily Change -0.0122
Today’s Daily Change % -1.00
Today’s Daily Opening 1.2161
Trends
20 Daily SMA 1.2029
50 Daily SMA 1.2192
100 Daily SMA 1.2489
200 Daily SMA 1.2957
levels
Previous Daily High 1.2215
Previous Daily Minimum 1.2065
Previous Maximum Weekly 1.2246
Previous Weekly Minimum 1,196
Monthly Prior Maximum 1.2246
Previous Monthly Minimum 1,176
Daily Fibonacci 38.2% 1.2158
Daily Fibonacci 61.8% 1.2122
Daily Pivot Point S1 1.2079
Daily Pivot Point S2 1.1997
Daily Pivot Point S3 1.1929
Daily Pivot Point R1 1.2229
Daily Pivot Point R2 1.2297
Daily Pivot Point R3 1.2379

Source: Fx Street

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