In Friday’s North American session, the Pound Sterling (GBP) has slid from its earlier peak of 1.3320 against the US Dollar (USD). This decline in the GBP/USD pair is due to the USD rebounding after the US released optimistic Nonfarm Payrolls (NFP) data for April. The US Dollar Index (DXY), which measures the value of the Greenback against six major currencies, has also risen from its lowest point of 99.60.
The NFP data revealed that employers added 177K new employees, surpassing the predicted 130K, but still lower than March’s figure of 185K (which was revised down from 228K). The Unemployment Rate remained steady at 4.2%, as expected. However, Average Hourly Earnings, a critical indicator of wage growth, rose at a slower rate of 3.8% year-on-year, falling short of the projected 3.9%. On a monthly basis, wage growth also slowed to 0.2%, compared to the estimated 0.3%.
Despite the Trump administration’s controversial tariff policies, the Fed is not expected to make any changes to its monetary policy, as the US labor market has shown consistent hiring. The central bank is primarily focused on managing consumer inflation expectations. The recent ISM Manufacturing Prices Paid index indicated that input costs are still on the rise. As a result, businesses may pass on these higher costs to consumers, leading to an increase in inflation. This could limit the Fed’s ability to ease monetary policy. However, if job growth starts to slow down, the Fed may prioritize employment over inflation concerns.
Moving forward, the Fed’s next monetary policy decision on May 7th will play a crucial role in determining the direction of the US Dollar. Currently, according to the CME FedWatch tool, traders are anticipating that the central bank will maintain interest rates within the 4.25%-4.50% range.
On Friday, the Pound Sterling has bounced back from its weekly low of 1.3260 against the US Dollar, after a correction from its three-year high of 1.3445 over the past three trading days. The overall outlook for the pair remains positive, as all short-to-long Exponential Moving Averages (EMAs) are still increasing.
The 14-day Relative Strength Index (RSI) is struggling to rise back above 60.00. A new bullish momentum may occur if the RSI manages to surpass this level.
In terms of resistance, the three-year high of 1.3445 will be a significant obstacle for the pair. On the downside, the April 3rd high around 1.3200 will serve as a significant support level.
