GBPUSD rises on dovish Fed sentiment

The GBPUSD pair continues its winning streak for the fourth consecutive day, trading around 1.2550 in Asian markets on Monday.

The Sterling-Dollar appreciation could be attributed to the recalibrated expectations for the Federal Reserve’s interest rate cuts in 2024 following the release of lower-than-expected U.S jobs data.

On Friday, non-farm payrolls (NFP) showed that the US economy added 175,000 jobs in April, lower than the estimated 243,000, signaling a significant slowdown from the March addition of 315,000.

Additionally, Average hourly earnings (YoY) increased 3.9% in April, slightly lower than expected at 4.0% and 4.1% prior. In the meantime, the monthly growth was at 0.2%, falling short of the expected 0.3%.

The Fed is now anticipated to enact its initial cut in September, a shift from earlier projections pointing toward November.

As per the CME FedWatch Tool, the likelihood of a 25 basis points rate reduction by the Fed during September’s meeting has risen to 48.8%, up from 43.8% a week ago.

Across the pond, the Bank of England is expected to maintain rates unchanged at 5.25% during Thursday’s meeting.

Investor sentiment regarding interest rate cuts by the BoE has been postponed to September, as investors express concerns about robust wage growth in the United Kingdom, which is fueling core inflation, the central bank’s preferred inflation measure.

In April, BoE Governor Andrew Bailey conveyed optimism as the UK’s inflation appeared to be on track to meet the 2% target. The inflation rate dropped to 3.2% in March, marking the lowest rate since September 2021.

(Source: OANDA)