The GBP/USD pair is holding steady around 1.3135 in the early Asian session on Monday, breaking a three-day losing streak. With no major economic data releases from the UK this week, the movement of the USD will be the key driver for GBP/USD. All eyes are on the US Nonfarm Payrolls (NFP) report for August, which will be released on Friday.
The US Federal Reserve’s (Fed) hints at an imminent rate cut continue to put pressure on the US Dollar. Fed Chair Jerome Powell’s comments last week signaled a high likelihood of a 25 basis points rate cut in September, with a 70% probability according to the CME FedWatch tool. A 50 bps reduction is also on the table with a 30% chance.
The upcoming US employment data on Friday will play a crucial role in determining the direction of the USD. Expectations are for 163K job additions in August, a lower Unemployment Rate of 4.2%, and a rise in Average Hourly Earnings to 0.3% MoM in July. Any weaker-than-expected results could raise concerns about a slowdown in the US economy and push the USD lower.
On the other hand, investors are optimistic about the Bank of England’s (BoE) gradual approach to policy easing for the rest of the year, which could boost the Pound Sterling (GBP). Economists are anticipating one more 25 bps rate cut from the BoE based on a Reuters poll.
Analysis:
The GBP/USD pair is holding steady near 1.3135 as Fed rate cut expectations weigh on the US Dollar. The upcoming US Nonfarm Payrolls report will be crucial in determining the USD’s direction. Meanwhile, investors are hopeful for a gradual policy easing cycle by the Bank of England, which could support the Pound Sterling. Keeping an eye on these developments will be essential for traders and investors looking to navigate the currency markets effectively.