GBP/USD has sustained its winning streak for the fourth consecutive day, hovering around 1.2550 during Monday’s Asian trading hours. The appreciation of the GBP/USD pair is attributed to recalibrated expectations for Federal Reserve interest rate cuts in 2024, following the release of lower-than-expected US jobs data.
The US Nonfarm Payrolls report on Friday revealed that the economy added 175,000 jobs in April, falling short of the estimated 243,000 and signaling a notable slowdown from March’s addition of 315,000 jobs. Average Hourly Earnings (YoY) in April increased by 3.9%, slightly below the expected 4.0% and the prior 4.1%. Meanwhile, monthly growth stood at 0.2%, slightly missing the expected 0.3%.
Market consensus now anticipates the Federal Reserve to implement its initial rate cut in September, a departure from previous projections pointing towards November. According to the CME FedWatch Tool, the probability of a 25 basis points (bps) rate reduction by the Fed during September’s meeting has surged to 48.8%, up from 43.8% a week ago.
On the other side of the Atlantic, the Bank of England (BoE) is expected to maintain rates unchanged at 5.25% during Thursday’s meeting. Investor sentiment regarding interest rate cuts by the BoE has shifted to September, fueled by concerns about robust wage growth in the UK, which is driving core inflation, the central bank‘s preferred inflation measure.
BoE Governor Andrew Bailey expressed optimism in April as the UK’s inflation seemed on track to meet the 2% target. The inflation rate dropped to 3.2% in March, marking the lowest rate since September 2021.
