- GBP/USD kicks off the new week on a softer note as the post-NFP USD selloff seems to have abated.
- September Fed rate cut bets and concerns about the central bank’s independence might cap the USD.
- Traders might refrain from placing aggressive bets ahead of the key BoE policy meeting on Thursday.
The GBP/USD pair struggles to capitalize on Friday’s solid bounce from the 1.3140 area, or its lowest level since May 12, and kicks off the new week on a softer note. Spot prices currently trade around the 1.3265-1.3260 region, though the downside seems limited as traders might refrain from placing aggressive directional bets ahead of the Bank of England (BoE) meeting later this week.
The UK central bank is widely expected to cut interest rates by 25 basis points (bps) to 4% on Thursday amid concerns around job market prospects. In fact, the UK labour market has weakened recently, and pay growth has cooled more quickly than the BoE’s May forecast. However, signs of still sticky inflation suggest that the committee is likely to remain cautious. Nevertheless, the outlook will play a key role in influencing the British Pound (GBP) and provide some meaningful impetus to the GBP/USD pair.
In the meantime, a modest US Dollar (USD) bounce following Friday’s dismal US Nonfarm Payrolls (NFP)-inspired slump turns out to be a key factor weighing on spot prices during the Asian session. The upside for the USD seems limited amid the growing acceptance that the Federal Reserve (Fed) will resume its rate-cutting cycle in September. The bets were lifted by a miss in the headline US NFP and a sharp downward revision of June’s job growth, which underlines a significant deterioration in the jobs market.
Meanwhile, US President Donald Trump stepped up his extraordinary attacks on Fed Chair Jerome Powell and called on the board to wrest control of the central bank and lower interest rates. This adds to concerns about the central bank’s independence, which might hold back the USD bulls from placing aggressive bets and limit the downside for the GBP/USD pair heading into the key central bank event. However, last week’s breakdown below the 100-day Simple Moving Average (SMA) was seen as a key trigger for bears.
