GBP/USD stretches higher toward 1.31 on dismal NFP figures
- Brexit headlines boost the demand for pound sterling on Friday.
- Greenback weakens following the U.S. employment report.
- Nonfarm payroll increase by 134K in September vs 185K expected.
The GBP/USD pair gained traction on Brexit headlines during the European trading hours and rose toward 1.3050. With today's nonfarm payrolls figures falling short of market expectations, the greenback lost its strength and the pair rose to a fresh 5-day high at 1.2088 in the last hour. As of writing, the pair was up 0.5% on the day at 1.3085.
Earlier today, citing EU source with direct knowledge of the matter Reuters reported that Brexit negotiators believe that a divorce deal with the UK was 'very close.' Reflecting the broad-based GBP strength, the EUR/GBP pair slumped to its lowest level since early July at 0.8807.
On the other hand, the US Dollar Index, which spiked to a session top near 96 with the initial reaction to the employment report, reversed its course and was last seen down 0.12% on the day at 95.65. According to the U.S. Bureau of Labor Statistics, nonfarm payrolls increased by 134,000 in September to disappoint participants who were forecasting a 185,000 growth. On a positive note, the August reading got revised up to 270,000 from 201,000 and the unemployment rate fell to its lowest level since 1969 at 3.7%.
Commenting on the data, "The large upward revision to August payrolls, from 201,000 to 270,000 takes some of the sting out of the September number. Taken together the total of 404,000 is slightly above the recent average," FXStreet Senior Analyst Joseph Trevisani said and added:
"There is little in this report to dissuade the Fed from continuing its projected rate path. Remember, the Fed is not tightening to choke off future inflation, or curtail excessive growth, at least not yet, but to return interest rates to a more 'normal' level. What the normal or neutral level might be in relation to economic growth is uncertain."
Technical levels to consider
The pair could face the initial resistance at 1.3090/1.3100 (20-DMA/psychological level) ahead of 1.3165 (Sep. 24 high) and 1.3215 (Sep. 26 high). On the downside, supports are located at 1.3060 (100-DMA), 1.3000 (psychological level) and 1.2955 (50-DMA).
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.
