GBP/USD Bulls Surge, Pair Climbs Toward 1.2550 Amid USD Weakness
GBP/USD is displaying a bullish trajectory as it inches higher towards the 1.2550 level in early Europe. The currency pair is benefiting from a risk-friendly market environment, leading to a weakening of the safe-haven US Dollar. Despite concerns over UK economic challenges stemming from Brexit, GBP/USD remains resilient. Investors now shift their attention to the eagerly awaited US Non-Farm Payrolls (NFP) report.
Earlier on Wednesday, GBP/USD faced bearish pressure and dipped to the 1.2350 region due to safe-haven flows bolstering the US Dollar (USD). However, during the late American session, the USD lost its strength as the risk sentiment improved following the US House of Representatives' passage of a bill to suspend the debt-ceiling until January 1, 2025. Additionally, dovish comments from Federal Reserve (Fed) officials further weighed on the USD's performance.
Both Philadelphia Fed President Patrick Harker and Fed Governor Philip Jefferson expressed their reluctance to consider a rate hike in June. Consequently, the probability of a 25 basis points rate increase at the upcoming policy meeting, as indicated by the CME Group FedWatch Tool, rose above 60%, up from around 30% earlier in the day.
Nevertheless, the USD is putting up some resistance against its counterparts early on Thursday, which is temporarily limiting the upside potential for GBP/USD. However, given the prevailing risk-positive market sentiment and the current market expectations regarding the Fed's rate outlook, the USD may struggle to outperform other major currencies.
Later in the American session, the Automatic Data Processing (ADP) will release the private sector employment report, with market expectations of a growth of 170,000 jobs in May, following the impressive 229,000 increase recorded in April. A weaker-than-expected reading in this report could weigh on the USD in the short term, providing an opportunity for GBP/USD to extend its upward momentum. Conversely, a stronger-than-anticipated figure may limit GBP/USD's gains. Additionally, the US economic calendar will feature the ISM Manufacturing PMI survey for May, with the headline PMI expected to remain below 50, indicating continued contraction in the sector's activity. Unless this data exhibits a recovery above 50, it is unlikely to provide support for the USD.
Our bullish outlook suggests that GBP/USD may experience a continuation of its upward trend, with a target towards the 1.26500 area.
Earlier on Wednesday, GBP/USD faced bearish pressure and dipped to the 1.2350 region due to safe-haven flows bolstering the US Dollar (USD). However, during the late American session, the USD lost its strength as the risk sentiment improved following the US House of Representatives' passage of a bill to suspend the debt-ceiling until January 1, 2025. Additionally, dovish comments from Federal Reserve (Fed) officials further weighed on the USD's performance.
Both Philadelphia Fed President Patrick Harker and Fed Governor Philip Jefferson expressed their reluctance to consider a rate hike in June. Consequently, the probability of a 25 basis points rate increase at the upcoming policy meeting, as indicated by the CME Group FedWatch Tool, rose above 60%, up from around 30% earlier in the day.
Nevertheless, the USD is putting up some resistance against its counterparts early on Thursday, which is temporarily limiting the upside potential for GBP/USD. However, given the prevailing risk-positive market sentiment and the current market expectations regarding the Fed's rate outlook, the USD may struggle to outperform other major currencies.
Later in the American session, the Automatic Data Processing (ADP) will release the private sector employment report, with market expectations of a growth of 170,000 jobs in May, following the impressive 229,000 increase recorded in April. A weaker-than-expected reading in this report could weigh on the USD in the short term, providing an opportunity for GBP/USD to extend its upward momentum. Conversely, a stronger-than-anticipated figure may limit GBP/USD's gains. Additionally, the US economic calendar will feature the ISM Manufacturing PMI survey for May, with the headline PMI expected to remain below 50, indicating continued contraction in the sector's activity. Unless this data exhibits a recovery above 50, it is unlikely to provide support for the USD.
Our bullish outlook suggests that GBP/USD may experience a continuation of its upward trend, with a target towards the 1.26500 area.
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