In the American session, the pound-to-dollar exchange rate dropped to 1.2576, its lowest level in three days. The US dollar is robust, exerting downward pressure on the pair despite the contradictory Nonfarm Payrolls report.
On Wednesday, the pound-to-dollar exchange rate hit a new weekly high of 1.2747 before retracing towards Thursday’s opening price of 1.2700. As investors wait for US data releases, the technical picture for the pair seems positive.
GBP/USD added to its weekly gain on Wednesday thanks to the widespread drop of the US Dollar. The second quarter’s annualised growth rate of GDP was revised to 2.1% from 2.4% by the US Bureau of Economic Analysis in its second estimate. ADP reports that private-sector employment increased by 177,000 in August, which is lower than the 195,000 gain expected by the market. The USD Index, which measures the value of the USD relative to six major currencies, dropped 0.3% after these data releases, and the yield on the 10-year US Treasury note declined.
The cautious market stance aids the USD in recouping some of its weekly losses, and the GBP/USD is trading lower early Thursday. Meanwhile, BoE Chief Economist Huw Pill’s pronouncements about the future of policy have made it difficult for Sterling to maintain its value. Pill warned that inflation was no time for complacency, yet he advocated for a status quo interest rate policy.
In the afternoon, we’ll get the latest numbers on Initial Jobless Claims and the Personal Consumption Expenditures Price Index for the United States.
Jerome Powell, chairman of the Federal Open Market Committee, projected July Core PCE inflation of 4.3% at the Jackson Hole Symposium on Friday. If the information is not shocking, investors may not act on it. In the afternoon, USD selling pressure could increase if the number of initial claims for jobless benefits reaches 250,000.
Trade Idea:
Consider a cautious short-term sell on GBP/USD if it drops below 1.2570, targeting 1.2520, but stay vigilant for potential volatility after US data releases and Powell’s speech.