- GBP/USD trades in positive territory above 1.2900 early Friday.
- Nonfarm Payrolls in the US are forecast to rise by 160K in February.
- The pair remains technically overbought in the near term.
After moving sideways on Thursday and the Asian session on Friday, GBP/USD regained its traction and touched a fresh multi-month high above 1.2900 in the European morning. The February employment report from the US could drive the pair’s action heading into the weekend.
British Pound PRICE This week
The table below shows the percentage change of British Pound (GBP) against listed major currencies this week. British Pound was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -4.34% | -2.63% | -2.09% | -1.05% | -1.73% | -2.25% | -2.74% | |
| EUR | 4.34% | 1.68% | 2.13% | 3.25% | 2.61% | 2.00% | 1.48% | |
| GBP | 2.63% | -1.68% | 0.57% | 1.55% | 0.94% | 0.32% | -0.19% | |
| JPY | 2.09% | -2.13% | -0.57% | 1.29% | 0.42% | -0.11% | -0.67% | |
| CAD | 1.05% | -3.25% | -1.55% | -1.29% | -0.54% | -1.21% | -1.71% | |
| AUD | 1.73% | -2.61% | -0.94% | -0.42% | 0.54% | -0.60% | -1.10% | |
| NZD | 2.25% | -2.00% | -0.32% | 0.11% | 1.21% | 0.60% | -0.51% | |
| CHF | 2.74% | -1.48% | 0.19% | 0.67% | 1.71% | 1.10% | 0.51% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
The risk-averse market atmosphere helped the US Dollar (USD) limit its losses and made it difficult for GBP/USD to extend its uptrend on Thursday. Early Friday, US stock index futures trade in positive territory and the USD Index, which tracks the USD’s valuation against a basket of six major currencies, stays in the red below 104.00, allowing GBP/USD to stretch higher.
In the second half of the day, the US Bureau of Labor Statistics will release the labor market data. Earlier this week, disappointing macroeconomic data releases from the US revived fears over an economic downturn and caused markets to start pricing in a stronger probability of a Federal Reserve (Fed) rate cut in May. According to the CME FedWatch Tool, markets currently see about a 50% chance of a Fed policy hold in May, down from about 70% last week.
Hence, a disappointing Nonfarm Payrolls (NFP) print of 140,000 or lower could make it difficult for the USD to find demand. On the flip side, markets could reassess the Fed’s rate outlook if the data offers a significant positive surprise, with a reading at or above 200,000. In this scenario, GBP/USD could stage a deep correction.
GBP/USD Technical Analysis
GBP/USD was last seen trading slightly above the upper limit of the ascending regression channel and the Relative Strength Index (RSI) indicator was sitting above 70, reflecting overbought conditions.
In case GBP/USD stages a technical correction, 1.2900 (static level, round level) could be seen as interim support ahead of 1.2800 (200-day Simple Moving Average) and 1.2770 (mid-point of the ascending channel). On the upside, immediate resistance is located at 1.2920 (upper limit of the ascending channel) before 1.3000 (static level, round level) and 1.3040 (static level from November).
Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.
