- GBP/USD extends its fall, hitting a three-week low of around 1.2397 amid the fading fear of a possible US default and buoyant market sentiment.
- The robust US labor market report from the Bureau of Labor Statistics and an unexpected Philadelphia Fed Manufacturing Index recovery apply downward pressure on the pair.
- Bank of England speakers suggest a gradual and predictable approach to Quantitative Tightening, providing little support for the Pound.
GBP/USD prolongs its falls past the 1.2400 figure, reaching a new three-week low at around 1.2397, as the Pound Sterling takes a hit, taking advantage of a light economic calendar in the United Kingdom (UK). Fears of a possible default in the United States (US) are fading, as talks between US Congress leaders and the White House showed hope that an agreement would emerge before June 1. The GBP/USD is trading at 1.2423 after hitting a daily high of 1.2492.
Positive US labor market and fading default fears weighed on the GBP
US equities are trading mixed, though earlier it rode a wave of optimism, posting gains due to a buoyant market atmosphere. Discussions regarding the US debt ceiling remain ongoing, underscored by recent statements from US House Speaker Kevin McCarthy. McCarthy stressed the critical need for an agreement this week, reiterating the urgency for Congress to vote to avert a potential default in the forthcoming week.
The US Bureau of Labor Statistics (BLS) released a robust labor market report. Initial Jobless Claims for the week ending May 13 recorded a lower-than-expected rise of 242K, a noticeable drop from the previous week’s 254K. It’s noteworthy, however, that the prior week’s figures were somewhat distorted due to fraudulent claims reported in Massachusetts.
In the meantime, although negative, the Philadelphia Fed Manufacturing Index outperformed expectations, with the index dropping to -10.4, better than the anticipated fall of -19.8, and showed a significant recovery from April’s dismal -31.3. This upturn primarily stems from a rebound in new orders, despite a decline in the employment component and a rise in the price gauge. The increase in producer prices might discourage the Federal Reserve (Fed) from putting its tightening cycle on hold.
Following the release of the data, the GBP/USD dropped from around 1.2440s. The pair fell sharply toward its weekly low before reclaiming the 1.2400 figure. The greenback continued to rise in the day, as shown by the US Dollar Index, which measures the buck’s performance against a basket of six currencies; it is up 0.66%, at 103.541, eyeing a test of the 2017 high oat 103.820.
Regarding the central bank speakers, Dallas Fed President Lorie Logan said that data this time does not support skipping rate hikes at the next meeting, adding that the Fed has not made the progress we need on inflation.
Meanwhile, the UK economic docket featured Bank of England’s (BoE) speakers, who commented that Quantitative Tightening (QT) would be gradual, predictable, and not an active policy instrument. They added that it has some economic effects but is fairly small. BoE’s Michael Ramsden said, “We’re probably going to have several years to go for QT.”
GBP/USD Technical Levels
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 steady below 1.0800 after US PCE meets expectations
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair barely reacted to US PCE inflation data, with the Greenback shedding some pips. Fed Chair Jerome Powell set to speak ahead of the weekly close.
GBP/USD hovers around 1.2620 in dull trading
GBP/USD trades sideways above 1.2600 amid a widespread holiday restraining action across financial markets. Investors took a long weekend ahead of critical United States employment data next week. Fed Chair Powell coming up next.
Gold price sits at all-time highs above $2,230
Gold price holds near a fresh all-time high at $2,236 in thinned trading amid the Easter Holiday. Most major world markets remain closed, although the United States published core PCE inflation, the Federal Reserve’s favorite inflation gauge.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.