- GBP/USD has been moving sideways after closing in the red on Thursday.
- The greenback is struggling to gather bullish momentum.
- US December jobs report could ramp up volatility ahead of the weekend.
GBP/USD has been moving sideways around 1.3550 so far on Friday after closing in the negative territory on Thursday. Investors await the US Bureau of Labor Statistics to release the December jobs report, which could have a significant impact on how markets price the Federal Reserve's policy outlook.
The FOMC's December policy meeting minutes showed on Wednesday that participants saw it appropriate to start the balance sheet normalization process after the first hike. The publication further revealed that current economic conditions, namely the inflation outlook and the state of the labour market, were seen as factors that would allow a faster balance sheet runoff than the previous financial crisis.
The surprisingly hawkish tone of the statement allowed US Treasury bond yields to push higher and helped the dollar gather strength.
The CME Group's FedWatch Tool, used to forecast future policy moves, shows markets are currently pricing in a 63% probability of a March rate hike, compared to 71% on Thursday. This development suggests that investors are waiting for the December Nonfarm Payrolls (NFP) report before continuing to price in a rate increase in March.
The market expectation is for NFP to rise by 400,000 following November's disappointing increase of 210,000. A print close to market consensus should be good enough to for the Fed to stick to its hawkish outlook.
Traders will also pay close attention to the wage inflation reading in the payrolls' report. The Average Hourly Earnings are forecast to edge lower to 4.1% on a yearly basis in December from 4.8% in November. Wage inflation is a greater concern for the Fed as it immediately feeds into more persistent price pressures than a one-month increase in employment and a strong figure could trigger a dollar rally and vice versa.
GBP/USD Technical Analysis
On the four-hour chart, the Relative Strength Index (RSI) indicator stays afloat above 50, suggesting a lack of interest from sellers for the time being.
In case the NFP report provides a boost to the dollar, 1.3500 (psychological level, 50-period SMA) aligns as key support. A break below that level could open the way for additional losses toward 1.3450 (static level) and 1.3420 (100-period SMA).
With regards to upside, interim resistance seems to have formed at 1.3565 (static level) before 1.3600 (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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.