Pound sterling surges to around 1.3160 against the US dollar ahead of the September NFP data.
In Friday’s London session, the British pound (GBP) finds buying interest near the round-level support of 1.3100 against the US dollar (USD). The GBPUSD pair recovers to 1.3160 after a three-day losing streak. However, the pair’s near-term future unknown, with investors focusing on the September Nonfarm Payrolls (NFP) report from the United States (US). Which scheduled for release at 12:30 GMT.
Market players will pay close attention to the US NFP data. Which will provide new insights into the current state of the US job market.
The likelihood of the Fed reducing interest rates by a further 75 basis points by year-end has decreased dramatically.
The US Federal Reserve (Fed) began its policy-easing cycle in September with a larger-than-usual interest rate lowering of 50 basis points (bps), with officials hoping to boost labor market strength amid a drop in price pressures.
The official employment report is expected to indicate that US firms employed 140K job seekers. Which somewhat lower than the August figure of 142K. The unemployment rate predicted to have remained stable at 4.2%.
Investors will also pay special attention to Average Hourly Earnings data. A crucial metric of wage inflation that drives consumer spending. Which forecast to rise by 3.8% year on year. Monthly wage growth metric is expected to expand by 0.3%, slowing from 0.4% in August.
The labor market data will have a substantial impact on the Fed’s monetary policy decisions for the remaining two meetings this year. According to the CME FedWatch tool, the possibility of the Fed reducing interest rates by 75 basis points (bps) by the end of the year has dropped to 55% from 79% a week earlier.
Daily Market movers: Pound Sterling surpasses its key peers.
On Friday, the pound sterling outperformed its major peers. However, it is expected to face pressure as tensions between Iran and Israel have escalated into a full-fledged war following the killing of Hezbollah leader Hassan Nasrallah. Oil prices have risen as tensions in the Middle East worsen. Historically, a substantial increase in energy prices has on the currencies of those economies that rely substantially on imported oil, resulting in increased foreign outflows.
Bailey of the Bank of England stressed the necessity for significant interest rate cuts.
Aside from that, BoE Governor Andrew Bailey’s comments on the interest rate outlook on Thursday have lowered Sterling’s outlook. Baily’s comments in an interview with the Guardian newspaper appeared dovish, emphasizing the need to aggressively decrease interest rates if price pressures continue to weaken.
According to Reuters, Bailey suggested the BoE may become “a bit more activist” and “a bit more aggressive” in its approach to decreasing interest rates if the central bank receives more positive inflation data.
On the economic front, the revised S&P Global/CIPS Construction PMI estimate of 57.2 is much higher than predicted. The Construction PMI. Which measures construction activity, predicted to grow at a slower rate, to 53.1 from 53.6 in earlier forecasts.
