GBPUSD has extended its losses in the early London trading session on Friday. The currency pair lacks support in the absence of UK data and on the heels of forecast-beating US PPI and jobs data. It traded at 1.2740, corresponding to -0.10% below the opening price at the time of writing. There is increased uncertainty over the Fed’s interest rate cut timeline, giving the dollar a stronger support heading into the weekend.
The US Producer Price Index reading came in at 0.6% in February, beating the forecast figure of 0.3%. The PPI is used to gauge inflation, and the latest readings signal that Consumer Inflation could stay above the Fed’s preferred level of 2% for longer. Initial jobless claims fell to 209,000, beating the forecast figure of 218,000. FOMC members have recently pushed the narrative that while they are concerned about the impact of higher-for-longer interest rates, they need stronger evidence of slowing inflation before reducing the rates. These figures certainly provide no such evidence
The pound, meanwhile, reels from a weaker labour market and lower inflation figure. The UK’s February unemployment rate came in at 3.9%, exceeding the forecast estimate of 3.8%. The BoE has stated that it is not in a hurry to cut interest rates, but the market will get a clearer picture next week when the February CPI figures are released.
Heading into the weekend, the pound is in a precarious position, as US Treasuries rise. Yields on 10-year and 5-year bonds hover near 4.300%, and this will add to the downward pressure on GBPUSD.
Technical analysis
The RSI on GBPUSD trading pair signals that the sellers are in control. They will likely extend that control as long as action remains below the pivot 1.2765. That could see them break the 1.2705 support to test 1.2685. Conversely, if the buyers push back to bring the action above 1.2765, GBPUSD could build momentum to the upside. That could see them breach the 1.2785 resistance and test the 1.2805 mark in extension.
GBPUSD on a 30-minute chart