The GBP/USD currency pair is trading at 1.2060 after hitting a day high of 1.2265. The Pound Sterling does not oppose positive economic indicators in the US. The US economy is still strong despite the US Federal Reserve’s tightening cycle, as seen by the US employment figures and services activity.
The UK GDP and US Fed speakers are on the traders’ radar for the next week. Following a surprise, positive employment data from the United States (US), which fueled rumour that the Federal Reserve (Fed) would hike rates over Wednesday’s 25 basis points level, GBP/USD plunged and extended its losses above the 50 and 200-day Exponential Moving Average (EMA) (bps).
On the back of strong US economic statistics, the GBP/USD fell, calling for further Fed tightening. After the publication of the January Nonfarm Payrolls data, investor mood soured. According to data, the economy created 517K new jobs as opposed to the 200K predicted, which caused the unemployment rate to decrease from 3.5% to 3.4%. The December numbers were also higher, indicating that the US Federal Reserve still has work to do to bring persistently high inflation down to its target of 2%.
As the headline appeared on the screens, the GBP/USD plunged from around its daily highs at 1.2260s and dropped 200 pips into the 1.2060 regions. The US Dollar Index, which gauges the dollar’s value against a basket of six other currencies, increased to 102.90, a new three-week high, up 0.94%.
Later, the Institute for Supply Management (ISM) reported that although prices paid slowed, activity in the services sector increased above expansionary territory. The ISM Non-Manufacturing PMI increased by 55.2 last month, compared to 49.2 in December, which was higher than the 50.4 experts had predicted.
The UK S&P Global/CIPS Services PMI had its weakest month two years earlier in the European session, dropping to 48.7 from December’s 49.9, its lowest level since January 2021. As a result, the S&P Composite PMI, which combines data from the manufacturing and services sectors, declined from 49.0 in December to 48.5 in January.
What should you look out for?
The Monetary Policy Report Hearings and the Gross Domestic Product (GDP) MoM and QoQ are on the UK economic schedule for the next week. Speakers from the US Federal Reserve, including Jerome Powell and John C. Williams from the New York Fed, will be featured on the US economic agenda from across the pond. Initial Jobless Claims and Consumer Sentiment from the University of Michigan (UoM) might also provide some insight into the state of the US economy.