GBP/USD juggles around 1.2570 as investors await US employment for further action
- GBP/USD is showing a sideways performance around 1.2570 ahead of the release of the US NFP data.
- The street is worried that renewed US banking crisis could dent the financial lending system.
- UK businesses are comfortably passing the impact of higher employment costs to ultimate consumers.
The GBP/USD pair is demonstrating a back-and-forth action around 1.2570 in the early Asian session. The Cable has turned sideways as investors are awaiting the release of the United States Nonfarm Payrolls (NFP) data for further guidance. The US Dollar Index (DXY) has extended its recovery to near 101.45 as investors are worried that upbeat employment data could force the Federal Reserve (Fed) to continue its policy-tightening spell.
S&P500 futures have added some gains in Asia after three consecutive bearish settlements, portraying a minor recovery in the risk-on impulse. The street is worried that renewed US banking crisis could dent the financial lending system and impacts the confidence of investors. Therefore, the optimism about Fed’s neutral interest rate guidance has faded.
A preliminary US NFP report (April) shows that the economy added 179K jobs in April, lower than former additions of 236K. The Unemployment Rate is seen unchanged at 3.5%. Apart from them, the major catalyst will be Average Hourly Earnings data. Monthly and annual Average Hourly Earnings may remain steady at 0.3% and 4.2% respectively.
This indicates that the labor market conditions are still tight and the bargaining power is in the favor of job seekers. Higher earnings would allow households to make decent purchases, which will keep propelling inflationary pressures. If Fed says that further action will be more data-dependent then sticky wages could maintain pressure on the Fed for making monetary policy more restrictive.
On the Pound Sterling front, United Kingdom’s final S&P Global/CIPS Services PMI rose to 55.9 from 52.9 in March. Reuters reported that UK businesses are comfortably passing the impact of higher employment costs to ultimate consumers. The context is expected to create more troubles for the Bank of England (BoE), which is even struggling to bring down inflation from double-digit figures.