During the Friday trading session in North America, the Pound Sterling (GBP) has retreated from its peak of 1.3320 against the US Dollar (USD). The GBP/USD pair has given back some of its earlier gains as the US Dollar rebounds following the positive United States (US) Nonfarm Payrolls (NFP) data for April. The US Dollar Index (DXY), which monitors the Greenback’s performance against six main currencies, has bounced back from its low of 99.60 earlier in the day.
The latest US NFP data reported that employers added 177K new employees, surpassing the estimated 130K but falling short of the previous month’s figure of 185K, which was revised down from 228K. The Unemployment Rate remained steady at 4.2%, in line with expectations. However, the key measure of wage growth, Average Hourly Earnings, increased steadily by 3.8% year-on-year, falling short of the estimated 3.9%. On a monthly basis, wage growth slowed to 0.2%, below both market expectations and the previous month’s increase of 0.3%.
Despite the US President Donald Trump’s trade policies, the Federal Reserve (Fed) is unlikely to alter its monetary policy as the country’s job market continues to show stability. The Fed’s main focus will be on controlling the high consumer inflation expectations. According to Thursday’s data from the ISM Manufacturing Prices Paid index, input costs are still rising. This could lead to business owners increasing prices, eventually leading to higher inflation and limiting the potential for the Fed to make any cut in interest rates. On the other hand, a slowdown in job growth could force the Fed to prioritize employment over inflation.
Looking ahead, the next big event for the US Dollar will be the Fed’s monetary policy decision, scheduled for May 7. According to the CME FedWatch tool, the market is almost certain that the central bank will maintain its interest rates between 4.25%-4.50%.
On Friday, the Pound Sterling has recovered from its weekly low of 1.3260 against the US Dollar. The pair has seen a correction in the past three trading days after reaching a three-year high of 1.3445. The overall outlook for the pair remains bullish, with all short-to-long Exponential Moving Averages (EMAs) showing upward movement.
The 14-day Relative Strength Index (RSI) is struggling to climb back above the 60.00 mark. A fresh bullish momentum could be triggered if the RSI manages to cross this level.
In terms of resistance, the three-year high of 1.3445 will be a significant level to watch. On the downside, the April 3 high of 1.3200 will serve as a key support area.
