GBP/USD reverses the post-NFP dip and bounces to 1.2600 area, just below one-year top

GBP/USD reverses the post-NFP dip and bounces to 1.2600 area, just below one-year top

Time Stamp: May 5, 2023 10:03 AM
Source Node: 2630415

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  • GBP/USD pulls back from a nearly one-year high amid a goodish pickup in the USD demand.
  • The upbeat US jobs data pushes the US bond yields higher and provides a boost to the buck.
  • The risk-on impulse caps gains for the USD and limits any meaningful downfall for the major.
  • Traders also seem reluctant ahead of next week’s US CPI report and the BoE policy meeting.

The GBP/USD pair drops to a fresh daily low in reaction to the better-than-expected US monthly employment details, albeit manages to find some support ahead of the mid-1.2500s. Spot prices bounce back to the 1.2585-1.2590 region during the early North American session and trade with a mild positive bias for the third straight day, just below a nearly one-year high touched earlier today.

The US Dollar (USD) strengthens across the board following the release of the upbeat US NFP report, which turns out to be a key factor acting as a headwind for the GBP/USD pair. In fact, the US Bureau of Labor Statistics (BLS) reported that the US economy added 253K new jobs in April, much higher than the 179K anticipated and the previous month’s downward revised reading of 165K. Further details revealed that the Unemployment Rate unexpectedly edged lower to 3.4% from 3.5 and Average Hourly Earnings rose to 4.4% from 4.3%.

The upbeat data, meanwhile, points to sustained labor market strength and could force the Federal Reserve (Fed) to keep interest rates higher for some time. This, in turn, pushes the US Treasury bond yields sharply higher, which underpins the Greenback and exerts some pressure on the GBP/USD pair. That said, the risk-on impulse – as depicted by a strong opening in the US equity markets – keeps a lid on the safe-haven buck. Apart from this, rising bets for a 25 bps rate hike by the Bank of England (BoE) help limit the downside for the major.

Hence, the market focus will remain glued to the highly-anticipated BoE monetary policy meeting next Thursday. Heading into the key central bank event risk, investors will take cues from the latest US consumer inflation figures on Wednesday. This will play a key role in determining the near-term trajectory for the GBP/USD pair. Nevertheless, spot prices remain on track to register gains for the third straight week.

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