Sterling’s rally stalls as US jobs data reopens Fed debate

The Pound Sterling retreats some 0.09% against the US Dollar as the latest US inflation report reaffirmed what Fed Chair Warsh said that the labour market is “consistent with full employment.” GBP/USD trades near Friday’s opening price of 1.3512.

GBP/USD slips as strong US jobs and Fed hawks support Dollar

The US Nonfarm Payrolls in August exceeded the forecast of 56K, coming in at 162K and above July’s print of 21 K. The Unemployment Rate was unchanged at 4.1%. The data reassured Fed officials that if needed, they can raise rates without harming the labour market.

Last week, Fed Chairman Kevin Warsh said the jobs market was “consistent with full employment” at Jackson Hole, where he took a hawkish stance, prioritizing inflation.

Recently, Cleveland Fed Beth Hammack noted that “policy is not restrictive and inflation is too high.” She added that “contact views indicate now is the time for the Fed to hike to control inflation.”

Meanwhile, money markets now assign a 61% probability of a rate increase by the Fed in September, up from 54% yesterday, via Prime Terminal.

Consequently, the US Dollar Index (DXY), which tracks the performance of the American currency against six peers, is up 0.18%, at 99.17.

For the next week, traders eye the release of the US Price Index (PPI), the Consumer Price Index (CPI), jobless claims data, the US Monthly Budget Statement and the University of Michigan Consumer Sentiment for September.

In the UK, the Bank of England (BoE) Chief Economist Huw Pill said on Thursday that raising rates now would reduce the chance the central bank would have to be more aggressive in future to tame inflation, which has picked up as a result of the war in Iran.

The swap markets indicate that speculators expect the BoE to hike rates twice in six months. For the September meeting, economists anticipate unchanged rates.

In the UK, the schedule will feature Retail Sales and Gross Domestic Product (GDP) figures for July.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3521, keeping a constructive near-term tone as it holds above a cluster of former trend-line resistances turned support around 1.3476–1.3375, while still capped by the simple moving average trio, which now converges near 1.3455 as immediate overhead resistance. The latest 14-period Relative Strength Index sits close to 50, hinting at neutral momentum and suggesting that a sustained break away from this moving average barrier would be needed to revive a stronger bullish extension.

On the topside, the first resistance is the simple moving average cluster near 1.3455, and a daily close above this area would open the way toward the next structural cap at the upward trend-line break level around 1.3657. On the downside, initial support is seen at the recent trend-line pivot near 1.3476, with further demand expected at the rising trend-line base around 1.3425 and the lower former resistance line near 1.3375, where buyers would likely try to defend the broader advance.