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Pound holds near 1.3500 as US payroll data drives rate expectations
The Cable move is framed as a “rebate” on lower US tightening odds, with the next US inflation release likely to determine whether recent gains are kept.
The British pound held near 1.3500 against the US dollar, trading in a narrow range of about 45 pips and up roughly 0.13% on the day, according to FXStreet.
FXStreet said the pound’s rise since an early August trough just below 1.3300 has largely reflected weaker US payrolls rather than repricing of UK rates. It pointed to July nonfarm payrolls contracting by 23K versus an 80K consensus and a revision to June down to 20K, which also pushed the dollar index to its weakest level since early June.
In FXStreet’s view, sterling is supported by conditional US rate pricing, with a September 16 hike priced at 49.9% versus 50.1% for a hold. The probability of at least one move by October 28 was cited at 76.5%, while the current range was described as having no chance of surviving into December 9.
FXStreet also noted that the Bank of England held its Bank Rate at 3.75% on July 30, with the MPC split 6-3, and said speculative positioning into that meeting shifted rather than unwound. It added that Wednesday’s US inflation print could decide whether the dollar-driven “rebate” behind the pound’s gains is taken back.
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