• GBP/USD extends its range-bound price action on the release of monthly US employment data.
• The dollar fell in reaction to an unexpected rise in the US unemployment rate and softer wage growth.
• Markets continue to expect a 75 basis point Fed rate hike in September, limiting the USD’s decline.
• The gloomy outlook for the UK economy continues to undermine the British pound and favors the bears.

The pair GBP/USD continues its struggle to gain significant traction and remains confined to a tight range in the early American session. The pair is currently hovering around 1.1550 and is little moved following the release of the US monthly employment report.

The slightly better-than-expected headline NFP data showing the US economy added 312,000 jobs in August was offset by an unexpected rise in the unemployment rate, to 3.7% from 3, 5% above. Furthermore, average earnings growth slowed to 0.3% during the month in question, down sharply from the upwardly revised 0.5% in July. The US dollar increased its intraday losses in reaction to the data, although expectations from the US Federal Reserve help limit losses.

Indeed, markets are still pricing in the possibility of a 75 basis point Fed rate hike at the September meeting. This continues to support elevated US Treasury yields, which, in turn, should help the dollar halt its corrective pullback from Thursday’s two-decade high. On the other hand, the bleak outlook for the UK economy is helping to curb any significant rise in the GBP/USD pair, at least for now.

Nonetheless, spot prices remain a considerable distance from the lowest level since March 2020, set the day before, and appear vulnerable to a further decline. The bears, however, would rather wait for a convincing break below the key psychological 1.1500 level before positioning themselves for an extension of the downside move. However, the fundamental backdrop suggests that the path of least resistance for GBP/USD is to the downside.

Technical levels