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GBP/USD attracted some deep-buys on Friday, although there is no bullish conviction.
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The BoE’s bleak economic outlook continues to act as a headwind for sterling.
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A little USD strength also contributed to capping ahead of the US NFP report.
The GBP/USD pair reverses modest intraday losses and climbs back closer to the daily high during the early European session. The pair is currently trading just above the mid-1.2100s and might now be looking to build on the overnight bounce from the weekly low touched in reaction to the Bank of England’s bleak economic outlook.
In fact, the UK’s central bank has warned that a recession will start in the fourth quarter and that the economic downturn could last five quarters. Adding to this, the BoE said that monetary policy is not on a pre-determined path, suggesting that it could slow the pace of policy tightening. That said, the lack of any meaningful buying around the US dollar gives some support to the GBP/USD pair.
Despite further taunts from several Fed officials this week, investors are pushing back against the idea of a larger interest rate hike at September’s FOMC meeting. Apart from this, a positive tone around the equity markets weakens the safe-haven buck and helps the GBP/USD pair to attract some buying near the 1.2130 area, although there is no follow-through of the uptick.
Traders now seem reluctant to place aggressive bets and prefer to wait on the sidelines ahead of the closely-watched US monthly jobs data, due later during the early North American session. The popularly known NFP report is expected to show that the economy added 250K jobs in July, down sharply from 372K in the previous month, and that the unemployment rate remained steady at 3.6%.
Apart from this, investors will take cues from Average Hourly Earnings growth data. This will play a key role in influencing the near-term USD price dynamics and help determine the next leg of a directional move for the GBP/USD pair. In the meantime, spot prices seem more likely to remain confined in a range below the 1.2200-1.2210 strong resistance zone.
Technical levels to watch
GBP/USD
