GBP/USD Gains Momentum Ahead of US NFP Data
- GBP/USD trades on a firmer note around 1.3125 in Friday’s early Asian session.
- The US Nonfarm Payrolls (NFP) data will be in the spotlight on Friday.
- BoE’s Bailey hints at a more aggressive rate reduction.
The GBP/USD pair is showing modest gains, approaching 1.3125, as it breaks a three-day losing streak during the early Asian session on Friday. However, the upside potential for this major pair may be limited as traders prepare for the highly anticipated US Nonfarm Payrolls (NFP) data release later today.
Fed Chair Powell’s Comments
Earlier this week, Federal Reserve (Fed) Chair Jerome Powell mentioned that the recent half-percentage point interest rate cut should not be interpreted as a signal for future aggressive moves. Powell indicated that if economic data remains steady, there could be two more rate cuts this year, but they are likely to be smaller. This shift in expectations for Fed rate cuts could support the US Dollar in the short term.
Encouraging US Economic Data
Positive US economic data released on Thursday is strengthening the USD. The Institute for Supply Management (ISM) reported that the US Services Purchasing Managers Index (PMI) rose to 54.9 in September, exceeding the previous reading of 51.5 and beating market expectations of 51.7.
Bank of England’s Monetary Policy
The Pound Sterling (GBP) weakened to two-week lows on Thursday following Bank of England (BoE) Governor Andrew Bailey’s comments. Bailey suggested that the UK central bank could take a more aggressive approach to lowering interest rates due to subdued inflation. This has raised expectations for a quarter-point rate cut in November and a potential consecutive reduction in December.
Pound Sterling FAQs
What is the Pound Sterling (GBP)?
The Pound Sterling is the oldest currency in the world, officially used in the United Kingdom. It is the fourth most traded currency in the foreign exchange market, with key trading pairs including GBP/USD, GBP/JPY, and EUR/GBP. The Bank of England issues the Pound Sterling.
Factors Influencing GBP Value
Monetary policy decisions by the Bank of England, based on achieving price stability and adjusting interest rates, are crucial factors affecting the value of the Pound Sterling. Economic indicators such as GDP, PMIs, and employment data also play a significant role in determining GBP’s direction.
Impact of Trade Balance on GBP
The Trade Balance, measuring a country’s exports and imports difference, can influence the strength of a currency. A positive Trade Balance strengthens the currency, while a negative balance can weaken it.