The GBP/USD pair continued its downward trend for a second consecutive day, dropping 0.12%. This decline is partly attributed to strong US job data that has renewed focus on the Federal Reserve’s efforts against persistent inflation, which has exceeded target levels for five years. Right now, the exchange rate stands at 1.3205.
Weakness of Sterling Amid Strong Wages and High Yields
The US Bureau of Labor Statistics reported that over 178,000 jobs were added in March, exceeding predictions by about 60,000. However, the February numbers were revised lower to show a loss of 133,000 jobs, while the unemployment rate dipped from 4.4% to 4.3%.
In the meantime, the US dollar index (DXY), which measures the dollar against a basket of six other currencies, saw a slight increase of at least 0.12%, climbing above the 100.00 mark. This rise is linked to growing expectations that the Federal Reserve will maintain current interest rates amidst ongoing tensions in the Middle East.
Interestingly, the US S&P Global Services PMI experienced a contraction in March for the first time since January, falling to 49.8 from 51.7 in February. Chris Williamson, chief business economist at S&P Global Market Intelligence, noted that the PMI data reflects the U.S. economy struggling with the pressure of rising prices and growing uncertainty, particularly as conflicts in the Middle East heighten concerns about recent policy decisions, especially tariffs.
Williamson pointed out that the current stagflationary scenario—marked by slowing growth and rising prices—is a significant challenge for policymakers, with S&P research indicating a slowdown in job growth.
Investor sentiment has shifted towards a less dovish outlook, with expectations that the Federal Reserve will keep interest rates steady for the remainder of the year, as indicated by data from the Chicago Board of Trade. Following the non-farm payroll announcement, US Treasury yields, especially for two-year bonds, increased slightly.
GBP/USD Price Analysis: Technical Overview
Currently, GBP/USD is positioned at 1.3205 on the daily chart. The short-term outlook appears slightly bearish, considering that the exchange rate has fallen below the simple moving average around 1.3550, indicating a loss of upward momentum. There have been repeated struggles against the downtrend resistance that began at 1.3869. Furthermore, the price has broken out from previous high support levels along the uptrend line from 1.3035, now concentrating on defending recent lows rather than pushing for higher gains. The rising FXS Fed Sentiment Index suggests that the strong US dollar continues to put the GBP/USD rally at risk while it trades below a broken resistance level.
Initial resistance is noted around the psychological barrier of 1.3300, where past rebounds have hesitated near the downtrend line, followed by levels at 1.3400 and 1.3500 that coincide with grouped moving averages acting as upper limits. On the downside, immediate support is identified just under the current price at 1.3200, with lower levels at 1.3100 and then the beginning of the uptrend line at 1.3035. A daily close below this would suggest a deeper bearish trend, whereas a rise above 1.3400 could ease the immediate downside pressure and facilitate a broader retracement toward 1.3500.
(The technical analysis in this report utilized AI tools.)
