GBP/USD faced a downturn as the US Dollar surged following robust US jobs data. The US Nonfarm Payrolls exceeded expectations in January, adding 353K jobs compared to the anticipated 180K. Federal Reserve Chair Jerome Powell emphasized that initiating rate cuts in the upcoming March meeting is premature.
BoE's Huw Pill noted that the appropriate time for rate cuts is likely in the future. Despite a two-session decline for GBP/USD, reaching around 1.2610 in Asian trading on Monday, the US Dollar, as measured by the US Dollar Index (DXY), reached an eight-week high, driven by positive market sentiment and the unlikely prospect of a March rate cut by the Federal Reserve. The optimism stems from a favorable labor market report released on Friday.
The US Bureau of Labor Statistics reported that Nonfarm Payrolls added 353,000 jobs in January, surpassing both the previous reading of 333,000 and the market consensus of 180,000. Additionally, Average Hourly Earnings (YoY) exceeded expectations at 4.5%, compared to the anticipated 4.1%, and the previous 4.4% rise. Traders are closely monitoring economic indicators, such as the ISM Services Employment Index scheduled for release on Monday, for further insights into the US labor market's condition and potential implications for monetary policy.
Fed Chair Powell reiterated that initiating rate cuts in March is premature, citing a strong economy. He emphasized the Fed's cautious approach to timing rate cuts, stating that while confidence is growing, the crucial step of initiating rate cuts requires more assurance.
On the other hand, Bank of England (BoE) Governor Andrew Bailey refrained from speculating on rate cuts, cautioning about potential price pressures in the second half of the year. The BoE prioritizes managing high inflationary pressures over addressing recession fears.
Additionally, BoE Chief Economist Huw Pill stated that the appropriate time for BoE to cut interest rates is likely in the future, driven by uncertainty about the persistence of longer-term inflationary pressures. Pill stressed the necessity for sufficient evidence before considering a reduction in the policy rate.
Paraphrasing text from "FX Street" all rights reserved by the original author.
