- NFP beats market expectations and sends the US dollar higher.
- GBP/USD bulls pushed back to the London open and session lows.
On the back of the US Nonfarm Payrolls that have come in at the hotter end of expectations, the US dollar has rallied, weighing heavily on its peers, including sterling.
GBP/USD has dropped to test the lows of the day on the knee-jerk. GBP/USD had been trading within a 45 pip box during the London morning between 1.2170 and 1.2125 ahead of the data, setting a meanwhile range for the day ahead, but bears are penetrating this box to the downside with a potential bearish breakout below 1.2050 now on the cards.
NFP doubles market expectations
Nonfarm Payrolls in the US rose by 528,000 in July, the data published by the US Bureau of Labor Statistics revealed on Friday. This reading followed June's increase of 398,000 (revised from 372,000) and came in better than the market expectation of 250,000. The Unemployment Rate edged lower to 3.5%.
Further details of the publication revealed that the annual wage inflation, as measured by the Average Hourly Earnings, remained unchanged at 5.2%, compared to analysts' estimate of 4.9%. Finally, the Labor Force Participation Rate declined to 62.1% from 62.2%.
Investors had been in anticipation of the report for further hints of how the US economy is faring. The jobs report is a relief for the greenback when taking into consideration the data on Thursday showed that the number of Americans filing new claims for unemployment benefits increased last week. However, the data now raises the prospects of a 75 bp hike from the Federal Reserve, which is not going to be favourable for risk sentiment nor the pound. The odds of a 75 bps hike have leaped to 61% from 40% on the release.
The data coincides with a stark warning from the Bank of England earlier this week, which raised rates by the most in 27 years to fight surging inflation in a dovish 50 bp hike to 1.75%. The central bank followed up by saying that a long recession was coming, beginning in the fourth quarter of this year, highlighting the bleak outlook for the UK economy and the pound.
"The central bank clearly believes a deep recession is not only inevitable but also necessary to bring down inflation. This will put it on a collision course with 10 Downing Street,'' analysts at Rabobank said.
US dollar rallies on NFP
Meanwhile, ahead of the jobs data, the US dollar edged higher on Friday in a correction of some of the sharpest daily drop in more than two weeks, sliding 0.68% on Thursday, the largest fall since July 19. The US dollar index (DXY), which measures the greenback against a basket of currencies, was up 0.15% to 105.90 just ahead of the data release, a touch below the day's high of 106.00. While the data is being digested, the index is rallying to a high of 106.5510 so far, now up over 0.68% on the day so far.
GBP/USD technical analysis
The price has moved out of a 4-hour rising channel with 1.2063 as a potentially key level on the downside. A break there could open the avenue for a significant sell-off in the coming week with 1.1950 daily trendline support eyed:
GBP/USD daily chart
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.
Recommended content
Editors’ Picks
EUR/USD loses traction, retreats below 1.0600
EUR/USD lost its recovery momentum and declined below 1.0600 in the American session on Friday, erasing a portion of its daily gains in the process. Nevertheless, the risk-positive market atmosphere after PCE inflation data helps the pair limit its losses.
GBP/USD turns negative on the day below 1.2200
GBP/USD reversed its direction and slumped below 1.2200 in the American session on Friday after rising above 1.2270 earlier in the day. Position readjustments and profit-taking on the last trading day of the quarter seems to be weighing on Pound Sterling.
Gold reverses direction, drops below $1,860
Following a steady rebound toward $1,880 on Friday, Gold price made a sharp U-turn and turned negative on the day near $1,860. Although the 10-year US T-bond yield is down more than 1%, XAU/USD struggles to find demand on the last day of Q3.
Polkadot Price Forecast: DOT reversal seems inevitable after 92% correction from all-time high
Polkadot price, in nearly two years, has shed 92.91% from its all-time high of $55.09. The massive downswing in DOT has pushed it down to levels that were last seen in October 2020. Hence, the chances of this altcoin forming a bottom and rallying are high.
Earnings beat triggers Nike to spike 9%
Nike (NKE) stock has surged over 9% in Friday’s premarket, climbing above $98 per share, following late Thursday’s fiscal first-quarter earnings release. Nike beat pessimistic earnings expectations by more than 23% and hiked its dividend by 9%.