British Pound trims losses against US Dollar after NFP-driven volatility

The British Pound (GBP) saw a brief decline against the US Dollar (USD) after weaker-than-expected Nonfarm Payrolls (NFP) data stunned markets on Friday. However, the pair quickly recovered much of its losses after the stronger-than-anticipated US employment figures were revealed. The GBP/USD pair fell to a low of 1.3482 before rebounding to trade around 1.3512 at the time of writing.

The US Nonfarm Payrolls for August increased by 162,000 jobs, surpassing market expectations of 56,000. The Unemployment Rate remained steady at 4.1%, and the US Dollar Index (DXY) rose to around 99.11 following the release, though it still stayed above a one-week low of 98.83. Analysts believe that traders are not yet convinced that the improved employment numbers will prompt a Federal Reserve (Fed) rate hike this month, with focus now turning to upcoming Consumer Price Index (CPI) and Producer Price Index (PPI) reports.

Fed officials have signaled a preference for price stability, and Governor Christopher Waller noted early signs of disinflation. Despite the positive jobs data, the possibility of a September rate hike now stands at around 60%, according to the CME FedWatch Tool. Meanwhile, Bank of England (BoE) Chief Economist Huw Pill has expressed support for raising interest rates to 4%, though a September decision is expected to leave rates unchanged at 3.75%.