Key Points:
- GBP/USD has been trading positively for three days, around 1.2795, despite minimal UK economic data.
- Bets on a US Fed rate cut by September rise to 68%, affecting USD and bond yields.
The GBP/USD pair is trading in positive territory for the third consecutive day, maintaining a position around 1.2795 during the early Asian session on Friday. This continuous uptrend highlights the pair’s resilience despite the lack of significant UK economic data releases. The positive momentum is mainly influenced by broader market dynamics, particularly those emanating from the United States.
Fed Rate Cut Bets Up to 68%, USD and Yields Drop
Recently, traders have significantly raised their bets on the US Federal Reserve (Fed), cutting interest rates later this year. This shift in expectations has had notable effects on the financial markets, particularly dragging the US Dollar (USD) and bond yields lower. The US Dollar Index (DXY) currently stands at 104.10, reflecting this sentiment. Concurrently, the US 10-year benchmark yield has decreased to 4.285%. According to the CME FedWatch tool, the odds of a Fed rate cut by September have risen to 68%, up from 55%.
229,000 Jobless Claims, NFP Expected at 185,000
The latest US labour data has been mixed, influencing market sentiments and speculations about future Fed policies. Initial jobless claims for the week ending May 31 increased to 229,000. This is up from 221,000 in the previous week. The figure is slightly above the market consensus of 220,000. Looking ahead, the NFP projections for May suggest job additions of 185,000 with an unemployment rate of 3.9%. Softer-than-expected employment data might trigger speculation about a potential Fed rate cut, which could exert additional selling pressure on the Greenback.
GBP/USD: UK Economic Data Could Trigger BoE Rate Cuts
In the UK, upcoming economic events include the release of employment and GDP data for April. These reports offer insights into the UK economy’s health and may influence the Bank of England’s monetary policy decisions. Market expectations indicate that the BoE might implement two rate cuts this year, possibly starting from the August meeting. These policy moves aim to counter economic slowdown and support growth, potentially impacting the GBP/USD pair’s trajectory.
NFP Data Crucial for Fed Policy & GBP/USD
Market participants closely monitor the interplay between US economic data and Fed policy expectations. The release of the NFP data later today is particularly significant, as it will provide crucial insights into the US labour market’s health and influence the Fed’s future monetary policy stance. A weaker-than-expected NFP report could solidify market expectations for a rate cut, further pressuring the USD and potentially benefiting the GBP/USD pair. Conversely, a robust employment report could bolster the USD, challenging the recent positive momentum of the GBP/USD pair.
