- The pound sterling is projected to rise to around 1.3580 against the US dollar, as demand for US jobs is decreasing.
- Market participants are looking forward to the significant revisions in the US Non-Farm Payroll (NFP) reports and a speech by BOE’s Briden.
- There’s a sense among investors that the Fed might lower interest rates by 25 basis points in the upcoming week.
The Pound Sterling (GBP) is set to continue its winning streak against the US Dollar (USD) into a third day on Tuesday. The GBP/USD pair is expected to reach a new three-week high of about 1.3580 during the European trading hours, ahead of the US Non-Agricultural Payroll (NFP) Benchmark Amendment Report set to be released at 14:00 GMT.
As of now, the US Dollar Index (DXY), which measures the dollar against six major currencies, is hitting a six-week low near 97.30.
Traders are keenly waiting for the revised US NFP Benchmark Report, which is anticipated to show discrepancies in the total monthly figures for the year ending March 2025. The 2026 Employment Status Release is also slated for revision during this time.
These figures are crucial for the Federal Reserve’s monetary policy direction, especially after it cut interest rates by 50 basis points at the September 2024 meeting, resulting in a downward adjustment of 818K, hence the 50 basis points change.
Daily Digest Market Mover: Weakening Job Demand Hits US Dollar
- The US dollar is lagging behind its counterparts as interest rate cuts are expected at next week’s meeting of the Federal Reserve.
- Data from the CME FedWatch tool shows that traders view an 11.6% chance of a 50 basis point cut, reducing rates to between 3.75% and 4.00%, while the remainder expect a standard cut of 25 basis points.
- Dovish expectations surrounding the Fed have grown due to deteriorating conditions in the US labor market. The NFP report from August indicated that only 22K jobs were added, leading to heightened anticipation for a rate cut following downward revisions in payroll figures for May and June.
- This week brings additional focus on US economic indicators, including the Producer Price Index (PPI) and Consumer Price Index (CPI) data set to be released on Wednesday and Thursday.
- Meanwhile, in the UK, attention is on a speech by the Bank of England’s Lieutenant Governor scheduled for 15:15 GMT. Her remarks on future monetary policy will be essential, with economists predicting stability at 4% during next week’s meeting. Briden was one of five Monetary Policy Committee members who voted for a 25 basis point cut in August.
- Lastly, UK investors are also anticipating July’s monthly gross domestic product (GDP) and factory data, expected on Friday, with a moderate growth forecast of 0.1%.
Technical Analysis: Pound Sterling Nearing 1.3580
The pound is nearing 1.3580 against the US dollar, representing the highest level seen in the past three weeks. The GBP/USD pair is climbing toward the upper end of a range established between 1.3333 and 1.3595 over the last month.
The short-term outlook for GBP/USD remains positive, trading above the 20-day exponential moving average (EMA).
The 14-day relative strength index (RSI) has been fluctuating between 40.00 and 60.00, which suggests a lateral trend in the market.
Looking ahead, the lowest value from August 1 at 1.3140 acts as a crucial support level. Conversely, the peak from July 1, around 1.3800, serves as a significant resistance point.
