The GBP/USD pair climbed for a second consecutive day on Thursday, signaling a potential bullish recovery, even as it struggled to reclaim the 1.3200 level. Market sentiment remained elevated as slower U.S. job growth kept expectations high for a more extended period of interest rate cuts from the Federal Reserve (Fed).
Economic data from the UK is limited as the market heads into Friday. The focus shifts to the U.S., where the release of the Nonfarm Payrolls (NFP) report in the final trading session of the week is expected to capture significant investor attention.
Payroll processor ADP reported that the U.S. added 99,000 new jobs in August, a decline from July's revised figure of 111,000 and well below the forecast of 145,000. This represents the lowest job growth since early 2021, heightening concerns over a potential recession in the U.S.
The ADP report is often seen as a precursor to the NFP report, though its predictive accuracy can be inconsistent. August's NFP data is the final significant labor market update before the Fed's upcoming meeting on September 18, where policymakers are widely expected to initiate a rate-cutting cycle. Markets are currently forecasting an NFP increase of 160,000 jobs, compared to the previous month's 114,000.
According to the CME Group, rate markets are currently pricing in a 40% probability of a 50 basis point (bps) rate cut by the Fed later this month, with a 60% chance of a smaller 25 bps reduction. Friday’s NFP data will likely be a crucial factor for investors assessing the Fed’s approach to its first rate cut since March 2020, when rates were slashed by 100 bps.
Despite a second consecutive intraday recovery on Wednesday, GBP/USD remains below its recent multi-month highs above 1.3250. The pair is holding close to these highs after reaching a 29-month peak in August. Price action continues to favor the bulls, staying above the 200-day Exponential Moving Average (EMA) at 1.2725, with immediate downside targets for bears around the 50-day EMA just above the 1.2900 level.
