British Pound tests 1.3500 as US Dollar struggles to shake off NFP shock
GBP/USD trades around 1.3495 on Monday at the time of writing, up a modest 0.04% on the day. However, the pair struggles to hold firmly above the psychological 1.3500 level after benefiting on Friday from a decline in the US Dollar (USD) triggered by disappointing United States (US) employment data.
On Monday, the British Pound tested the 1.3500 mark as the US Dollar grappled with the shockwaves of the Nonfarm Payrolls (NFP) report, which revealed a significant increase in unemployment. This development prompted a reassessment of the Federal Reserve's (Fed) interest-rate hike expectations, which dwindled to below 45% for a September hike, down from around 67% a week earlier.
This shift in expectations helped GBP/USD maintain its proximity to its recent high levels. The US Dollar's stabilization was bolstered by geopolitical unrest in the Middle East and around the Strait of Hormuz, along with the potential for higher oil prices to keep US inflation elevated. Investors' focus shifted towards upcoming US inflation figures, which could offer new insights into the Fed's trajectory.
Simultaneously, the UK awaited the preliminary GDP estimate for the second quarter, with expectations of a 0.4% growth, down from the previous 0.6%. A surprise in these figures could determine the British Pound's ability to support GBP/USD's potential move above 1.3500. Analysts at Brown Brothers Harriman forecast a slowdown in UK growth momentum in the upcoming quarter, with the Bank of England projecting a softer print at 0.3% q/q due to lower income growth and tighter financial conditions.
If the BoE's rate pricing softens without a GDP beat, GBP would be vulnerable to a dovish shift against the Pound.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
