The GBP/USD pair experienced a 0.9% decline on Thursday, leading to its lowest level in nearly a month below 1.2710 early Friday. The technical analysis indicates a correction phase for the pair as it struggles to gain momentum.
The Bank of England’s decision to lower the policy rate to 5% did not boost Pound Sterling’s strength, as confirmed by BoE Governor Andrew Bailey. The focus now shifts to the US labor market data release for July, with Nonfarm Payrolls expected to rise by 175,000 and the Unemployment Rate to remain at 4.1%.
A weaker-than-expected NFP print could weaken the USD initially, while a positive surprise could strengthen the currency against GBP. US stock index futures are showing signs of decline, which could lead to safe-haven flows benefiting the USD.
GBP/USD Technical Analysis
After testing the 1.2710-1.2700 support area, GBP/USD has started to edge higher. The RSI indicator suggests that the pair is correcting its oversold conditions. Resistance levels include 1.2750, 1.2780, and 1.2800, while a break below 1.2710-1.2700 could target 1.2620.
US Labor Market Data Impact
The Nonfarm Payrolls (NFP) release can influence the Fed’s decisions, impacting inflation, monetary policy, and interest rates. Higher NFP figures tend to strengthen the USD, while lower figures may weaken it. NFP also has a negative correlation with the price of Gold.
Understanding the impact of NFP on currency markets and commodities like Gold is crucial for investors and traders to make informed decisions based on economic data releases.