GBP/USD rises for a second day after ADP report
ADP payroll report comes in below forecasts
Ahead of tomorrow’s non-farm payrolls (NFP) report, attention was focused on the private payroll report from ADP. Expectations had been for 144,000 jobs to have been created, but the actual figure was just 99,000.
This was the lowest level since October 2023, and prompted further selling of the US dollar. Weakness in the US dollar prompted a fresh rise in GBP/USD, which had risen on Wednesday. This halted the pullback from the recent highs, which had capped a remarkable rally from the August low.
What can we expect from the Fed?
According to the CME’s FedWatch tool, markets are still pricing in a 55% chance of a 25bps rate cut when the Federal Open Market Committee (FOMC) meet later in the month. A 50bps cut is viewed as a 50% likelihood.
Markets are pricing in around 100bps of cuts by the Federal Reserve (Fed) by the end of the year, which may be too optimistic. If tomorrow’s payroll report comes in better than expected then the dollar may recover as expectations of a 50bps cut decline.
GBP/USD technical analysis
Cable’s recovery over the past 24 hours has put the buyers back in charge. After a brief pullback from the August highs, the price is moving higher once again.
A close back below $1.31 would be needed to suggest that the sellers have reasserted control. The pair has enjoyed a strong rally since April, with weakness in June and into early August seeing higher lows established.
The latest pullback and recovery leaves the trend in place, though it looks overstretched in the short-term, with the 50-day simple moving average (SMA) some 200 points away.