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- GBP/USD hits a new low on Friday after a week of rough downside action.
- Next week sees back-to-back central bank appearances from the Fed and BoE.
- Downside momentum remains a key risk for the GBP heading into the year’s final CB rate calls.
The GBP/USD is struggling to maintain its position at 1.2550 as the markets close on Friday. The pair plunged to a new low for the week near the 1.2500 level, following the release of a better-than-expected US Nonfarm Payrolls (NFP) that gave the US Dollar (USD) a final boost to end the trading week.
Throughout the week, the Pound Sterling (GBP) faced challenges, struggling against major currencies while seeing only modest gains against weaker counterparts. The GBP/USD pair is down 1.33% from Monday’s opening, as US economic releases took center stage, overshadowing the limited data from the UK.
The focal point this week has been the positioning of the Federal Reserve (Fed), with investors considering increased odds of earlier Fed rate cuts on a case-by-case basis. Market reactions have been fluctuating, depending on whether US economic figures exceeded or fell short of market forecasts.
Friday ended on a positive note for the US Dollar, with the release of the US Nonfarm Payrolls report showing a net addition of 199K new jobs, surpassing the market forecast of 180K and rising above October’s figures of 150K new jobs. Despite a below-expectation report earlier in the week, the positive NFP report caused market participants to shift their expectations for Fed rate cuts.
The upcoming week is set to see a flurry of central bank actions, with the US Fed announcing its final rate call for 2023 and updating its inflation outlook dot plot, followed by the Bank of England (BoE) and its latest interest rate decision. Both central banks are expected to maintain steady interest rates to close out the year at 5.5% and 5.25% respectively.
Prior to central bank announcements, next Tuesday will bring UK Average Earnings and Claimant Count Change figures. Quarterly average earnings are expected to decline from 7.7% to 7.4% in the third quarter, while unemployment benefits seekers are anticipated to increase from 17.8K to 20.3K in November.
The table below demonstrates the percentage change of Pound Sterling (GBP) against major currencies this week, highlighting Pound Sterling’s weakness against the Japanese Yen.