The GBP/USD pair saw a boost on Friday following a significant miss in the US Nonfarm Payrolls (NFP) data. The US job market showed signs of cooling down as the NFP revealed the lowest initial print in years. This unexpected development led to a decline in the Greenback, allowing the Pound Sterling to gain ground. However, despite this positive uptick, the GBP/USD pair still closed the week lower against the USD.
Looking ahead to the coming week, the focus will continue to be on economic data and speculations about potential rate cuts. The Pound Sterling faced pressure this past week after the Bank of England (BoE) announced a quarter-point rate cut, in line with market expectations. On the other hand, the US NFP data painted a worrying picture of the economy, indicating a faster downturn than initially anticipated by investors.
The recent NFP report showed that the US added 114K new jobs in July, falling short of the expected 175K. Moreover, the previous month’s figure was revised downward. The US Unemployment Rate also increased, reaching the highest level since November 2021. In addition, wage growth slowed both on a monthly and yearly basis, further highlighting the challenges in the labor market.
The disappointing economic data from the US prompted concerns about a potential recession, leading investors to move away from risky assets and causing declines in equity indexes. As a result, traders have priced in a rate cut by the Federal Reserve in September, with a possibility of a double-cut.
Looking ahead to the next week, the US will release the ISM Manufacturing Purchasing Managers Index (PMI) figures for July, which are expected to show an improvement compared to the previous month. On the UK side, the BRC Like-For-Like Retail Sales data for July is anticipated to recover after a contraction in the previous period.
In terms of technical outlook, the GBP/USD pair has been on a downward trend, falling significantly in recent weeks. While the Pound has found some support around the 1.2800 handle, downside momentum remains strong. Price action is currently hovering above the 200-day Exponential Moving Average (EMA), but intraday bids are struggling to surpass the 50-day EMA.
Overall, the Pound Sterling remains sensitive to economic data releases and monetary policy decisions by the Bank of England. Factors such as GDP growth, PMI figures, and trade balance data can all impact the value of the GBP. Investors will closely monitor upcoming economic indicators to assess the health of the UK economy and its potential implications for the Pound Sterling.