- GBP/USD drops back closer to the daily low amid the emergence of fresh USD buying.
- The upbeat US NFP data reaffirms Fed rate hike bets and acts as a tailwind for the buck.
- Concerns about the UK’s fiscal policy weigh on the GBP and contribute to the downtick.
The GBP/USD pair meets with a fresh supply during the early North American session and slides back closer to the daily low, below mid-1.1100s in reaction to the upbeat US employment details.
The US dollar reverses an intraday dip and climbs to a fresh weekly high after the headline NFP report showed that the US economy added 263K new jobs in September. The reading marks a notable slowdown from the 315K reported in the previous month, though surpasses consensus estimates for a reading of 250K.
Additional details revealed that the unemployment rate fell to 3.5% during the reported month from 3.7% in August, reaffirming hawkish Fed expectations. This, in turn, remains supportive of elevated US Treasury bond yields and underpins the greenback, which exerts some pressure on the GBP/USD pair.
Apart from rising bets for a more aggressive policy tightening by the Fed, the prevalent risk-off mood is seen as another factor benefitting the safe-haven buck. The British pound, on the other hand, is weighed down by concerns about the UK government's fiscal policy and looming recession risks.
The aforementioned fundamental factors suggest that the path of least resistance for the GBP/USD pair is to the downside. Hence, any attempted recovery might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly.
Technical levels to watch
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