(MENAFN- Daily Forex)
During last Friday's trading session, the US dollar fell and then recovered after the release of the weaker-than-expected US labor market report. According to licensed trading platforms, the GBP/USD exchange rate recovered to 1.3230 from 1.3170 after the US non-farm payrolls data came in below expectations at 160,000 jobs after falling to 142,000 jobs in August. The pair then fell again to fall below 1.32, perhaps due to a speech from John Williams of the federal Reserve, which did not include a clear commitment to cut US interest rates by 50 basis points later this month.
Williams said that the time had come for a US interest rate cut, but market expectations of a large 50 basis point move faded as he showed no inclination for such an aggressive initial cut. In addition, the US non-farm payrolls numbers were not significantly below expectations and remained above 114K in July. Additionally, the unemployment rate fell to 4.2% from 4.3%, which was expected. Also shining on the positive side for the US dollar was the stronger-than-expected earnings data of 0.44% on a monthly basis, which was stronger than the expected reading of 0.3%.
Widely, Hurricane Beryl is believed to have tarnished the picture in July, which is why the smoothing of the data on a three-month basis provides a good glimpse into the direction of the Labor market. The three-month rolling average has now fallen to 116K from 146K, confirming a clear trend of weakness.
According to Forex trading, the US dollar's reaction after the payrolls is likely to be limited to recent ranges as there is not enough evidence in this report to clearly indicate whether the Fed will raise US interest rates by 50 or 25 basis points, ensuring that an element of uncertainty remains.
Overall, the US inflation report this week will provide more guidance for the markets, but it should be noted that the US Federal Reserve has shifted its focus from inflation to employment, believing that higher prices are eventually expected to decline further in the coming months. The Fed will be concerned about rising unemployment if it does not take action, but the debate now is over how strong the opening strike will be.
Concurrently, the Fed is expected to cut US interest rates by a total of 100 basis points this year, meaning at least one of the remaining meetings will see a 50-basis point rate cut. If that happens, the US dollar could continue to fall as US interest rates converge with those in other parts of the world.
An analysis from Bank of America says:“With the US 10-year Treasury yield trending lower after the first Fed cut, global financial conditions are set to improve further. The US dollar could see further weakness as other central banks, especially those that cut rates before the Fed, are now able to let the Fed do some of its work.”
On the stock exchanges front, the FTSE 100 failed to recover and closed down about 0.7% at 8,181.5 on Friday, its lowest level in nearly a month, extending losses to a sixth straight session. Meanwhile, the performance came as global traders reassessed the latest US jobs report, which pointed to continued slowdown in the Labor market, reinforcing expectations of an imminent interest rate cut by the Federal Reserve. However, uncertainty persisted over the scope of the potential cut. Locally, figures from Halifax showed that UK house prices rose to a two-year high in August as confidence rebounded amid easing interest rates. Among individual stocks, Vestry Group shares hit the bottom of the index, down 6.3% after UBS analysts stuck to a“sell” rating on the housebuilder despite positive results on Thursday. Burberry shares lost more than 5% ahead of their imminent FTSE 100 plunge. Also, industrial mining shares fell on the back of lower copper and iron ore prices.
For the week, the FTSE 100 index of UK shares fell 2.3%.
Top Forex Brokers1 Get Started 74% of retail CFD accounts lose money Technical forecasts for the GBP/USD pair today:
The GBP/USD price is trying hard to avoid collapsing to the psychological support level of 1.3000 so that the current bullish hopes do not evaporate. Technically, this is the most prominent level on the daily chart below and the GBP/USD price may remain in the current performance area until the financial markets and investors react to the announcement of the US inflation figures. Obviously, this latest economic data that will determine the fate of the US Federal Reserve's decision in the coming days. In contrast, the resistance of 1.3250 remains the most important for the strength of bulls' control. At the same time technical indicators are moving towards strong overbought levels.
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