The GBP/USD exchange rate fell to its lowest levels in over a year on Thursday, as market participants geared up for the anticipated release of Nonfarm Payroll (NFP) data from the US on Friday. The ongoing weakening of the Pound against the US Dollar has created speculation that the differential between the two currencies may widen further, adding more pressure on Sterling.
As the Pound Sterling continues to lose ground against the Greenback, trading conditions remain thin due to the holiday season. This has maintained investor preference for the safe-haven US Dollar while they await the upcoming employment data. Comments from UK financial officials have indicated that the local financial markets are functioning smoothly, yet this has not prevented further selling of the Pound, as traders increasingly bet on the possibility of additional rate cuts from the Bank of England throughout the year.
In the United States, trading activity was halted on Thursday in remembrance of former President Jimmy Carter, who passed away in December. The pause in trading offered a brief respite before the Friday release of the NFP report, which is expected to reveal a modest slowdown in job additions for December. Changes in wage growth are anticipated to remain stable, with potential easing in monthly figures. Should the data exceed expectations, it may complicate the outlook for future interest rate cuts, as sustained wage growth can perpetuate high inflation expectations and indicate robust employment conditions.
The brief rally in GBP/USD , which saw two consecutive days of gains, has quickly dissipated with a subsequent three-day losing streak, resulting in a decline of nearly 3% this week. As the Pound approaches fresh 14-month lows, there remains a struggle among buyers to establish a support level above the critical 1.2200 level. If the downtrend continues, the currency pair may need to confront significant resistance at 15-month lows, just above the 1.2000 threshold, a level not encountered in nearly two years.
