GBP/USD eases from weekly highs above 1.3700 ahead of the NFP

Finance

GBP/USD eases from weekly highs above 1.3700 ahead of the NFP

The Pound (GBP) has retraced losses against the US Dollar (USD) on Wednesday, but failed to find acceptance at weekly highs above 1.3700 and has pulled back to the 1.3680 area at the time of writing. A weaker USD following Tuesday‘s downbeat US economic releases is offsetting the negative impact on the GBP from the UK’s political crisis.

Investors, however, remain cautious about placing USD directional bets ahead of the delayed Nonfarm Payrolls report, due later today. Market consensus anticipates a net job growth of 70K in January from 50K in December, with the Unemployment rate steady at 4.4% and wage growth slowing down to a 3.6% yearly growth from 3.8% in December.

The US Dollar fell under pressure on Tuesday as Decembers Retail Sales data stalled, with core Sales contracting, suggesting a lower contribution from consumption to Q4 GDP.

Beyond that, the employment costs cooled down more than expected, posting the slowest annual growth since early 2021. These figures suggest a stalled labour market with contained inflationary pressures, and endorse the markets view that the US Federal Reserve will cut interest rates more than once this year.

Recent US data has offset the negative impact of a political crisis in the UK that has left Prime Minister Keir Starmer fighting for survival. Recent news reports revealing the connections of the former UK ambassador to the US, Peter Mandelson, with the convicted sex offender Jeffrey Epstein, have caused an earthquake in the cabinet, prompting a string of resignations and putting Starmers position on the edge.