GBP/USD sees pullback from 9-month high as US jobs data deteriorated
|- US BLS data reveals an unexpected rise in Initial Jobless Claims to 228K as the labor market eases.
- Labor market data from multiple sources signal a slowdown in the jobs market.
- Money market futures estimates that the Fed will hold rates unchanged at May’s meeting.
The Pound Sterling (GBP) pullback from a 9-month high against the US Dollar (USD) on Tuesday dropped below the 1.2500 figure due to the buck’s renewed strength. The labor market in the United States (US) continues to deteriorate, painting a gloomy scenario for the US economy. The GBP/USD is trading at 1.2422 after hitting a high of 1.2486
GBP/USD drops as bad US jobs data underpin the greenback
Wall Street is trading with losses. The US Bureau of Labor Statistics (BLS) showed that Initial Jobless Claims for the week ending on April 1 exceeded forecasts of 200K, with data hitting 228K. Data linked to the labor market, namely the JOLTs job opening, ADP Employment Change, and the ISM Manufacturing PMI employment subcomponent, portrayed the labor market easing. That spurred an investor reaction, meaning that recessionary fears are the main reasons for the risk-off impulse seen in the last three days.
GBP/USD traders bought the US Dollar, with the pair diving from around daily highs of 1.2480, toward the lows at 1.2412. US Treasury bond yields, particularly the most sensitive to interest rates, the 2-year, dropped to 3.674% before reversing its course and is up at 3.789%.
Although the US 2-year Treasury bond yield has recovered, money market futures estimate that the Federal Reserve (Fed) would pause its tightening cycle at the May meeting. The odds of keeping rates unchanged are at 56.1%. In addition, some investors speculate that the Fed could cut rates as soon as July.
On Wednesday, the Cleveland Fed President Loretta Mester commented that rates need to rise “a little bit higher” and then hold them there for some time. She estimates that inflation will get to the Fed’s target by 2025.
The US Dollar Index (DXY), a gauge for the greenback value against a basket of six currencies, posts back-to-back bullish candles and rises 0.22%, up at 102.104.
On the UK front, the economy in the United Kingdom (UK) has fared well, contrasting the catastrophic economic projections by the Bank of England (BoE) and the UK’s Office for Budget Responsibility (OBR). Projections foresaw an 18-month recession, though the economy has avoided a recession and even posted more robust growth numbers in January. In the meantime, expectations for a 25 bps rate hike by the BoE stay at 63% at the May meeting.
GBP/USD Technical Analysis
After two straight sessions of registering losses, the GBP/USD stayed short of breaking to fresh three-day lows, below 1.2394, Tuesday’s low. If GBP/USD holds the spot price above the latter, it will keep buyers hopeful of breaking to new YTD highs above 1.2525. Upside risks lie at June 7 high at 1.2599, followed by May 27 pivot high at 1.2667. Contrarily, if GBP/USD drops past 1.2394, that would pave the way for a test of the 20-day EMA at 1.2290, below the 1.2300 psychological level.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.