The Pound Sterling (GBP) falls slightly to near 1.3100 against the US Dollar (USD) during Friday’s European session. The GBP/USD pair faces pressure as the US Dollar rebounds after a downside move on Thursday.
At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades marginally higher to near 99.80 after gaining temporary support near 99.60.
On Thursday, the US Dollar declined after a report from Challenger, Gray & Christmas showed that the United States (US) adoption of Artificial Intelligence (AI) led to a significant reduction in the overall laborforce in October. According to the report, employers laid off 153,074 workers in October, the biggest reduction for the month in over two decades. The figure was 183% higher than the numbers seen in September and 175% higher than the same month the previous year.
Renewed US labor market concerns have resulted in a slight increase in investors’ expectations supporting more interest rate cuts by the Federal Reserve (Fed) this year.
According to the CME FedWatch tool, the probability of the Fed cutting interest rates by 25 basis points (bps) to 3.50%-3.75% in the December meeting has increased to 67% from 62% seen on Wednesday.
Historically, the impact of the US Challenger jobs data on the US Dollar has remained limited. However, its influence has accelerated in the wake of the ongoing US federal shutdown, which has become the longest in history.
Pound Sterling weakens after BoE’s monetary policy announcement
- The Pound Sterling trades lower against its major currency peers on Friday, except second-level safe-haven currencies. The British currency has come under pressure after the Bank of England (BoE) decided to hold interest rates steady at 4%, with a narrow majority vote of 5-4.
- Five out of nine Monetary Policy Committee (MPC) members voted to keep interest rates at their current levels, against the expected six. For the first time, Deputy Governor Sarah Breeden voted against the majority and joined other officials – Swati Dhingra, Dave Ramsden and Alan Taylor – in backing a 25-basis-point reduction in borrowing rates.
- In the monetary policy statement, the BoE warned that “weak demand could weigh on inflation in the medium term” and the “risk from greater inflation persistence has become less pronounced recently”.
- Meanwhile, BoE Governor Andrew Bailey reiterated that monetary policy path remains titled to the downside. However, he clarified that officials need to see “downward path of inflation become more established before we cut rates again”. “We are likely to continue to be on a gradual downward path for rates,” Bailey added.
- Signs of United Kingdom (UK) price pressures peaking are expected to boost expectations for one more interest rate cut by the central bank this year.
Technical Analysis: Pound Sterling stabilizes below 200-day EMA
The Pound Sterling ticks lower to near 1.3110 against the US Dollar on Friday. GBP/USD p holds its over six-month low around 1.3000 posted on Tuesday. The overall trend of the pair remains bearish as it trades below the 200-day Exponential Moving Average (EMA), which is around 1.3265.
The 14-day Relative Strength Index (RSI) rebounds after turning oversold below 30.00. However, the overall momentum remains bearish.
Looking down, the April low near 1.2700 will act as a key support zone. On the upside, the October 28 high around 1.3370 will act as a key barrier.
