The British Pound (GBP) has dropped from its peak of 1.3320 against the US Dollar (USD) in the North American session on Friday. As the USD rebounds after the US released better-than-expected Nonfarm Payrolls (NFP) data for April, the GBP/USD pair has seen a decrease in its intra-day gains. The US Dollar Index (DXY), which measures the strength of the USD against six major currencies, has risen from its low of 99.60 during the day.
The recent US NFP data showed that 177,000 new workers were hired by employers, surpassing the estimated 130,000 but still lower than the March figure of 185,000 (revised down from 228,000). The Unemployment Rate remained at its predicted 4.2%. The key indicator of wage growth, Average Hourly Earnings, showed a steady increase of 3.8% on a yearly basis, below the expected 3.9%. On a monthly basis, this measure rose at a slower pace of 0.2%, compared to the estimated and previous release of 0.3%.
The Federal Reserve (Fed) is not expected to make any changes to its monetary policy as the US labor market has demonstrated consistent hiring despite tensions caused by President Donald Trump’s tariff policy. The Fed’s main focus will be to manage high consumer inflation expectations. The ISM Manufacturing Prices Paid index, released on Thursday, showed continued growth in input costs. This could eventually lead to increased consumer prices, resulting in limited monetary policy easing by the Fed. On the other hand, if there are signs of slowing job growth, the Fed will prioritize employment over inflation.
The next major event for the US Dollar will be the Fed’s monetary policy decision, which will be announced on May 7. According to the CME FedWatch tool, traders are predicting that the central bank will maintain interest rates at 4.25%-4.50%.
The British Pound has recovered from its low of 1.3260 against the US Dollar on Friday. The pair has experienced a correction over the past three trading days after reaching a three-year high of 1.3445. The overall outlook for the pair remains optimistic as all short-to-long Exponential Moving Averages (EMAs) are showing an upward trend. The 14-day Relative Strength Index (RSI) is attempting to rise above 60.00, indicating a possible bullish movement. On the upside, the three-year high of 1.3445 will be a significant barrier for the pair, while the April 3 high of 1.3200 will serve as a key support level on the downside.
