GBP/USD rallies sharply above 1.2070 on disappointing US Services PMI

• The GBP/USD soared close to 1.50% on disappointing US ISM Services data.
• Hawkish Fed speaking failed to weigh on the GBP/USD.
• Next week’s economic calendar would feature UK GDP, and US CPI reports.

The Pound Sterling (GBP) extended its gains against the US Dollar (USD), surging more than 160 pips on Friday, following a disappointing ISM Services report and an earlier jobs report. The GBP/USD Is trading at 1.2077.

US ISM Services Index plunges and weakened the USD

The GBP/USD printed another leg-up of more than 100 pips following the US Nonfarm Payrolls data release. Later, the Institute for Supply Management (ISM) revealed the Services PMI Index, which shrank to 49.6 against forecasts of 55 and trailed the November 56.5 jump. It should be said that it’s the lowest reading since May 2020, and traders should be wary that PMI readings below 50 indicate contraction.

Earlier, the US Department of Labor revealed that the US economy added more jobs than expected and that the Unemployment Rate edged lower. The report’s spotlight was Average Hourly Earning, which showed that wage inflation is easing, dropping to 4.6% YoY, below the 5.0% estimates.

Also read: GBP/USD pares Thursday losses, reclaims 1.1900 on soft USD after US NFP report

The GBP/USD extended its gains, above the 1.2050 mark, after the ISM Services PMI headline crossed newswires. The US Dollar Index, which tracks the American Dollar (USD) value against a basket of peers, plummets more than 1%, down at 104.000.

Meanwhile, further Fed speaking failed to underpin the US Dollar, as Federal Reserve Governor Lisa D. Cooks said that inflation is “far too high” and of “great concern” despite recent reports. In the meantime, Richmond’s Fed President Thomas Barkin said the Fed is still resolute on inflation and that it needs to stay on the case until inflation is “sustainably’ back to the 2% goal. He added that adopting a more gradual approach on interest rate paths should limit harm to the US economy.

UK’s next week’s calendar would feature Retail Sales, Gross Domestic Product, and the Trade Balance. On the US front, its calendar will feature the Consumer Price Index (CPI), unemployment claims, and the University of Michigan (UoM) Consumer Sentiment.

GBP/USD Key Technical Levels