GBP/USD Forecast: Pound Sterling could stretch higher if risk flows return after NFP
- GBP/USD recovered modestly after falling below 1.2650 on Friday.
- Improving risk mood could help the pair stretch higher ahead of the weekend.
- Nonfarm Payrolls in the US are forecast to rise 170,000 in August.
GBP/USD lost nearly 50 pips on Thursday snapped a three-day winning streak. Early Friday, the pair recovered above 1.2650 with markets gearing up for the US August jobs report.
Wall Street's main indexes edged lower on Thursday and the US Dollar Index staged a rebound after staying under bearish pressure in the first half of the week. This action, however, might have been a product of month-end flows since the market pricing of the Federal Reserve's (Fed) rate outlook remained virtually unchanged after the US data releases.
The Core Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred gauge of inflation, edged higher to 4.2% in July from 4.1% in June as expected. Other data from the US showed that the weekly Initial Jobless Claims declined to 228,000 from 232,000.
Pound Sterling price today
The table below shows the percentage change of Pound Sterling (GBP) against listed major currencies today. Pound Sterling was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.04% | -0.03% | -0.02% | 0.27% | 0.01% | 0.28% | -0.02% | |
| EUR | 0.05% | 0.02% | 0.03% | 0.32% | 0.06% | 0.33% | -0.01% | |
| GBP | 0.03% | 0.00% | 0.02% | 0.32% | 0.05% | 0.32% | 0.01% | |
| CAD | 0.02% | -0.03% | -0.02% | 0.30% | 0.02% | 0.30% | -0.04% | |
| AUD | -0.28% | -0.34% | -0.30% | -0.30% | -0.28% | 0.00% | -0.35% | |
| JPY | -0.02% | -0.05% | -0.04% | -0.05% | 0.28% | 0.29% | -0.04% | |
| NZD | -0.28% | -0.33% | -0.31% | -0.30% | -0.01% | -0.27% | -0.31% | |
| CHF | 0.05% | 0.01% | 0.03% | 0.04% | 0.34% | 0.06% | 0.35% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Nonfarm Payrolls in the US are expected to rise 170,000 in August. Earlier in the week, JOLTS Job Openings and ADP private sector employment report both pointed to loosening conditions in the US labor markets. A disappointing NFP reading between 100,000 and 150,000 could attract dovish Fed bets and make it difficult for the USD to find demand. According to the CME Group FedWatch Tool markets are pricing in a 53% probability that the Fed will hold the policy rate steady for the rest of the year.
In that scenario, US stocks could regain traction and help GBP/USD extend its rebound heading into the weekend.
On the other hand, a strong NFP print coupled with a sticky wage inflation could have the opposite effect on GBP/USD. On a yearly basis, Average Hourly Earnings are forecast to rise 4.4% to match the July increase.
GBP/USD Technical Analysis
GBP/USD faces strong resistance at 1.2690-1.2700, where the 100-period Simple Moving Average (SMA) on the 4-hour chart and the Fibonacci 23.6% retracement of the latest downtrend meet. Once the pair stabilizes above that area, it could face interim resistance at 1.2730 (static level) before targeting 1.2750 (200-period SMA) and 1.2780 (Fibonacci 38.2% retracement).
On the downside, 1.2650 (3-day old ascending line, 50-period SMA) aligns as first support before 1.2630 (static level) and 1.2600 (psychological level, static level).
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
