- The strong performance of the GBP/USD pair last week moved them towards the resistance level of 1.2773.
- Also, by the end of the week's trading GBPUSD was negatively affected, as the GBP/USD pair fell to the support level of 1.2613.
- Clearly, this came after the release of some hotter-than-expected US jobs and wages figures, which dashed hopes of a US rate cut by the Federal Reserve in March.
According to data from the economic calendar, it was announced that the US economy added 353,000 jobs in January, exceeding market expectations of 180,000 jobs. Adding to the excitement for dollar bulls, the number of jobs added was unexpectedly high, and at the same time, wages (average hourly earnings) rose 4.5% on an annual basis in January, up from 4.4% revised up and above the consensus for a decline to 4.1%. ING Bank commented on the results, saying that the strong and crazy US jobs numbers mean the Fed will wait.
These numbers mock a market that was priced in for a US interest rate cut from the Federal Reserve as early as March and push the timing of that first cut towards mid-year, at the earliest. In fact, with numbers like these, is it necessary for the US Federal Reserve to cut interest rates at all?. Analysts respond to this by saying, “We believe that the US jobs report has completely eliminated any remaining possibility of an interest rate cut in March by the Federal Reserve.”
In fact, this is a healthy economy as the country's unemployment rate remains at 3.7%, while the market expects that easing labor market conditions will reverse the unemployment rate to 3.8%. Generally, the US dollar was presented to all competitors, with the rise in US bond yields in testimony to the market, which is quickly reconsidering its expectations regarding when the US Federal Reserve will move to reduce interest rates.
The analysis by ING concludes that the US Non-Farm Payrolls report is inconsistent with other data prints, indicating a slowdown in the jobs market. Labor market surveys are much weaker, with ISM manufacturing and services sector surveys pointing into contraction territory – indicating job losses. Economists will therefore closely monitor the ISM's service sector employment index update on Monday. Overall, ING maintains a view that the US Federal Reserve will cut interest rates in May.
On the other hand, economists say that the Bank of England will cut interest rates in August, an expectation that conflicts with financial markets, which still see a good opportunity for an interest rate cut in May. Last Thursday, the Bank of England dropped its bias for raising interest rates and indicated that it was now neutral on policy, saying it needed time to consider incoming data before cutting interest rates.
Meanwhile, the timing of the interest rate cut, and the number of subsequent cuts is hot topics for financial markets, affecting the value of the pound, savings, business lending and mortgage rates. In short, the cost of money is based on a personal assumption that will continue to evolve. Therefore, following the Bank of England's decision and guidance in February, money market quotes showed that investors lowered their expectations for a May rate cut to 50/50, confirming that the bank had sent a "tight" message.
GBPUSD Expectations and Analysis Today:
Sterling forecasts against the dollar “GBP/USD” show that the bulls still have a chance to control the general trend and return to the resistance 1.2775. Obviously, this will be confirmed if the bulls succeed in a stronger breach towards the resistance level 1.2860, the psychological resistance 1.3000 will be the next most important target. On the other hand, according to the performance on the daily chart below, stability below the support level of 1.2600 will be important for the bears to move strongly downwards. Also, technical indicators are so far in a neutral position with an upward slope.
Today, the focus will be on announcing the PMI reading for the services sector from Britain and the United States. In addition to the reaction to the announcement of the policy of the Bank of England and the US Central Bank. Finally, we should not forget that the performance of global markets and investor sentiment towards risk appetite will have an impact on the price of sterling.
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