- GBP/USD falls 0.74% to 1.2535, influenced by Powell's rate stance and strong US jobs data.
- Powell's emphasis on inflation control tempers early rate cut expectations.
- US Nonfarm Payrolls' substantial job growth supports optimism for the US economy, boosting the Dollar.
- Rising US Treasury yields post-Powell and solid economic data prompt Fed rate cut reassessment.
- UK services sector's positive start overshadowed by US monetary policy and economic outlook focus.
The GBP/USD tumbles in the mid-North American session trade with losses of 0.74% and exchanges hands at 1.2535. Factors like last Friday's US economic data and over-the-weekend comments of Federal Reserve Chair Jerome Powell keep the US Dollar bid amid a risk-off impulse.
Jerome Powell pushes back against March rate cuts
Jerome Powell commented in an interview that it is premature to consider cutting rates, highlighting that the objective of driving inflation toward its 2% goal has not been fully fulfilled. Nevertheless, he left the door open to begin easing policy toward the year's first half.
Last week the January Nonfarm Payrolls report revealed an addition of 353K Americans to the workforce, while the unemployment rate remained stable at 3.7%. This data suggests that the labor market continues to be robust, supporting the Goldilocks narrative.
Data-wise, business activity in the services sector improved, according to S&P Global and the Institute for Supply Management (ISM), after the release of January´s reports.
US Treasury yields remain high during the day and underpin the Greenback as investors re-calibrate their bets for Fed rate cuts. Last week, they estimated the Federal Funds rate (FFR) to hit 3.96%, but following over-the-weekend Powell’s remarks, they expect it to end at 4.26%. Consequently, the US Dollar Index (DXY) rises 0.44%, up to 104.42.
Other data showed that British services businesses began the year positively.
GBP/USD Price Analysis: Technical outlook
Given the fundamental backdrop, the GBP/USD has fallen below the 200-day moving average (DMA) of 1.2560, aiming to extend its losses further below the 1.2500 figure. A decisive break will expose the 100-DMA at 1.2467, followed by the 1.2400 mark. On the upside, the pair first resistance would be the 200-DMA. If cleared, the next supply zone will emerge at 1.2600, followed by the 50-DMA at 1.2675.
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