The GBP/USD spot pulled back slightly after staging a remarkable comeback from its all-time low. It retreated to a low of 1.1366, which was slightly lower than this week’s high of 1.1476. The pair remains about 9.58% above the lowest level this week as focus shifts to the upcoming US non-farm payrolls (NFP) data.
US NFP data ahead
The GBP/USD pair has been in a strong bullish trend in the past few days as investors assess the recent UK tax cuts. In his first mini-budget, Chancellor Kwasi Kwarteng unveiled cuts worth over 45 billion pounds. This was the most aggressive that the UK has been in more than 40 years.
The pair pulled back this week after the government decided to tweak its tax cuts by removing those for the wealthy. The total cost of these cuts was estimated to be worth over £2 billion. In a statement on Wednesday, Lizz Truss vowed to be fiscally responsible even as she cuts taxes while making major investments.
The next key catalyst for the GBP/USD price will be the upcoming non-farm payrolls (NFP) data. Analysts expect the data to show that the economy created more than 250k jobs in September. This increase will be driven by the private sector, which is expected to have created over 200k jobs.
Analysts also believe that the unemployment rate remained unchanged at 3.7% while average hourly earnings rose by 5.1%. The GBPUSD price will also react to the latest UK housing data by Halifax. Expectations are that home prices retreated slightly in September as interest rates surged.
The hourly chart shows that the GBP to USD exchange rate pulled back slightly in the overnight session. It was trading at 1.1363, which was slightly below Thursday’s high of 1.1492.
The pair has also risen above all moving averages. It has also moved slightly below the first resistance of the standard pivot point at 1.1480. In all, I believe that these recent gains are temporary and are part of profit-taking as bears capitulate.
Still, in the immediate short-term, the pair will likely resume the upward trend as buyers target the second resistance level at 1.1800. A drop below the support at 1.1230 will invalidate the bullish view.