The Pound Sterling (GBP) recovers losses from an intraday low of 1.2450 inspired by the less-hawkish Bank of England's (BoE) interest rate policy. The GBP/USD pair rebounds strongly as the US Dollar weakens after the higher-than-expected Initial Jobless Claims (IJC) data. For the week ending May 3, individuals claiming jobless benefits were 231K, significantly higher than the consensus of 210K and the prior reading of 209K, upwardly revised from 208K. Weak jobless claims data has boosted concerns over easing labor market conditions due to higher interest rates by the Federal Reserve (Fed).
The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, falls sharply to 105.50 from the intraday high of 105.70. Earlier, the US Dollar was firm due to hawkish interest rate guidance from Federal Reserve (Fed) policymakers. S&P 500 futures have posted some losses in the Asian session, exhibiting a decline in investors’ risk appetite. The overall scenario has improved the US Dollar’s appeal. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, holds gains near 105.60.
On Wednesday, Boston Fed Bank President Susan Collins said that surprise upticks in recent inflation and activity readings suggest that the central bank needs to maintain interest rates at their current levels until they get greater confidence that inflation will sustainably return to the 2% target. Collins added, “A slowdown in activity will be needed to ensure that demand is better aligned with supply for inflation to return durably,” Reuters reported.
This week, Minneapolis Fed Bank President Neel Kashkari also emphasized the need to keep interest rates at their current levels for the entire year. Kashkari cited concerns over stalling progress in disinflation due to housing market strength.
The Pound Sterling finds significant buying interest near 1.2450. Though, the near-term outlook is uncertain as the asset has dropped below the 20-day Exponential Moving Average (EMA), which trades around 1.2510. Earlier, the Cable falls sharply after facing strong resistance above the neckline of the Head and Shoulder (H&S) chart pattern formed on a daily timeframe. On April 12, the pair fell sharply after breaking below the neckline of the H&S pattern plotted from December 8 low around 1.2500.
The 14-period Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, suggesting indecisiveness among market participants.
The Initial Jobless Claims released by the US Department of Labor is a measure of the number of people filing first-time claims for state unemployment insurance. A larger-than-expected number indicates weakness in the US labor market, reflects negatively on the US economy, and is negative for the US Dollar (USD). On the other hand, a decreasing number should be taken as bullish for the USD.
Read more.Last release: Thu May 09, 2024 12:30
Frequency: Weekly
Actual: 231K
Consensus: 210K
Previous: 208K
Source: US Department of Labor
Every Thursday, the US Department of Labor publishes the number of previous week’s initial claims for unemployment benefits in the US. Since this reading could be highly volatile, investors may pay closer attention to the four-week average. A downtrend is seen as a sign of an improving labour market and could have a positive impact on the USD’s performance against its rivals and vice versa.
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