GBP/USD trades on a stronger note below 1.2750 on a weaker US Dollar, UK’s budget

The GBP/USD pair breaks above the 1.2700 barrier and currently trades around 1.2735 during the early Asian session on Thursday. The uptick of the major pair is bolstered by the weaker US Dollar (USD) and encouraging news from the UK Spring Budget.

The Federal Reserve (Fed) Chair Jerome Powell told House lawmakers on Wednesday that interest rates might start coming down this year, but also cautioned that the Fed would take its time until the central bank gains greater confidence that inflation is moving sustainably toward the 2% target. Powell’s comment indicated that the Fed officials remain cautious about not losing the progress made against inflation, and the decision-making will be based on incoming data. 

About the data, the US JOLTS job openings fell to 8.863M in January from the previous reading of 9.026M, below the market consensus of 8.900M. The ADP private sector employment climbed 140,000 in February from 111,000 in January, weaker than the market expectation of 150,000. 

The UK’s Chancellor of the Exchequer, Jeremy Hunt, presented the spring budget to the House of Commons. Hunt said that the UK economy has dealt with the financial crisis, the pandemic, and the energy crisis caused by the war in Europe, while also adding that interest rates will remain high as the central bank tries to bring down inflation.

Additionally, Hunt said the UK economy is estimated to grow by 0.8% in 2024 and 1.9% in 2025, stronger than the 0.7% and 1.4% growth rates forecast by the Office for Budget Responsibility in November. That being said, the encouraging comments and the high-for-longer rate narrative in the UK lift the Pound Sterling (GBP) and act as a tailwind for the GBP/USD pair. 

The US weekly Initial Jobless Claims and Trade Balance are due on Thursday. Investors will also take more cues from the second testimony by Chair Powell and Fed’s Mester speech later in the day. On Friday, attention will shift to US Nonfarm Payrolls, which is projected to see 200K job additions in February from the previous reading of 353K.