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Forex Market: GBP/USD gains at the start of a data-laden week, US Non-Farm Payrolls report on markets’ radar

Following a two-day streak of losses, GBP/USD was a notch stronger at the start of the new, data-laden week.

The Sterling seemed unfazed by the latest political news from the UK, with Matt Hancock having to resign as health secretary after breaching social distancing rules.

The latest CFTC report showed that speculators had trimmed their net long position on GBP/USD to a 20-week low.

Meanwhile, against a basket of six major peers, the US Dollar was mostly steady on Monday after last week’s softer-than-anticipated US PCE inflation data failed to quell concerns about the Federal Reserve scaling back its monetary stimulus.

The Core PCE Price Index rose at a monthly rate of 0.5% in May, while falling short of market consensus of a 0.6% increase.

“Nonetheless the rise in core PCE to 3.4% year-on-year in May was the biggest jump since 1992 and markets remain cautious if the Fed will normalise (policy) earlier,” analysts at Maybank in Singapore wrote in an investor note, cited by Reuters.

The dollar received support following remarks by Federal Reserve President for Boston Eric Rosengren on Friday, who said the central bank might consider a rate hike as soon as late 2022, as the labor market achieves full employment.

Market focus now shifted to this week’s key US Non-Farm Payrolls report, due out on Friday, with a consensus of analyst estimates pointing to jobs growth of 675,000 in June.

“Now that the dust has settled, the reality is that U.S. rate hikes are still not close enough to trigger a sustained reversal of reflation trades and (a) stronger dollar,” MUFG analysts Derek Halpenny and Lee Hardman wrote in a note to clients.

“The latest non-farm payrolls report will provide insight into how long it will take for the labour market to fully recover. Absent a significant upside surprise, recent dollar gains should reverse further,” they added.

As of 9:15 GMT on Monday GBP/USD was edging up 0.33% to trade at 1.3916, while moving within a daily range of 1.3870-1.3939. The major currency pair has retreated 2.05% so far in June, following a 2.82% gain in May.

Bond Yield Spread

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, equaled 18.56 basis points (0.1856%) as of 8:15 GMT on Monday, down from 18.7 basis points on June 25th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 1.3892
R1 – 1.3914
R2 – 1.3957
R3 – 1.3979
R4 – 1.4000

S1 – 1.3849
S2 – 1.3827
S3 – 1.3784
S4 – 1.3740

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