- GBP/USD rallied to 1.2845, up 0.83%, after lower-than-expected US Non-Farm Payrolls figures added pressure on the Dollar.
- The US economy only added 209,000 jobs in June, below estimates of 225,000, causing the dollar’s value to fall across the board.
- As for the United Kingdom, despite fears of a possible recession, the swap market continues to forecast several more rate hikes by the Bank of England, which could reach 6%.
The pair GBP/USD rallied strongly after briefly approaching its daily low of 1.2725, but disappointing US data weighed on the dollar, opening the door for a late bounce in the Pound. At the time of writing, GBP/USD has broken above the 1.2800 level, trading at 1.2845, and gained 0.83%.
The pound sterling rallied after the release of US jobs data.
Key US economic data, particularly non-farm payrolls figures for June, showed the economy added just 209,000 jobs, below estimates of 225,000, sending the US dollar weaker overall. . In addition, the unemployment rate showed a tight labor market, slowing from 3.7% to 3.6% in June, while average hourly earnings (AHE) grew 4.4% year-on-year, up from 4.2 % from the previous month, adding to inflationary pressures and keeping the Federal Reserve (Fed) under pressure.
GBP/USD reacted higher and reclaimed 1.2800. After market analysts dissected the US Non-Farm Payrolls report, GBP/USD extended its gains beyond the R1 daily pivot at 1.2840. Consequently, the US Dollar Index (DXY), which measures the behavior of a basket of six currencies against the Dollar, lost 0.83%, standing at 102.249, which is a tailwind for GBP/USD.
US Treasury yields, primarily the 10-year Treasury note, which yields 4.042%, are largely unchanged. Although the labor market is showing signs of cooling, traders remain convinced that the US Federal Reserve (Fed) will raise rates by 25 basis points at the July 25-26 meeting, as the FedWatch tool from CME. The odds stand at 92.4%, up from 86.8% last week. However, they do not seem convinced that the Fed is going to raise rates twice, as the Fed dot chart shows.
Lately, Chicago Fed President Aaron Golsbee has said the job market is still strong, but it’s cooling off. Golsbee added that inflation is too high and one or two more rate hikes might be needed to control high inflation.
On the UK front, Bank of England (BoE) Governor Andrew Bailey said they must act now to put inflation at bay, allowing market participants to hold bets on several more hikes before the Bank decides the end credits of this season-hardening reel. The swap market continues to show that the BoE will raise rates to 6%, despite the fact that recent surveys on business activity in the manufacturing and services sectors paint a possible recessionary scenario in the country.
Given the fundamental background, GBP/USD is expected to rise further, but fears of a UK recession would limit the bullishness of the British pound (GBP). If the data is correct and the UK economy continues to hold up, GBP/USD could challenge 1.3000 in the medium term.
GBP/USD Price Analysis: Technical Perspective
Technically, GBP/USD hit fresh year-to-date highs at 1.2849 following the US data release. If GBP/USD makes a daily close above 1.2850, the 1.2900 level would be in play. Further rallies could challenge 1.3000. Conversely, if GBP/USD fails to post a daily close above 1.2850, the slide towards 1.2800 would deepen. A break below would reveal 1.2700, followed by the 20-day EMA at 1.2687.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
