GBP/USD finds a cushion around 1.2200, downside seems favored as spotlight shifts to US NFP

• GBP/USD has attempted to build a cushion around 1.2200 after a perpendicular sell-off.
• Investors are dumping the risk-perceived assets as anxiety among investors is soaring ahead of the US NFP data.
• The BoE might continue hiking interest rates as UK inflation is extremely stubborn.

The GBP/USD pair has sensed a pause in its vertical downside journey to near the round-level support of 1.2200 in the Tokyo session. The downside bias is the Cable is still solid as the US Dollar Index (DXY) is on the verge of recording fresh gains above the immediate resistance of 101.55.

Investors are dumping the risk-perceived assets as anxiety among investors is soaring ahead of the release of the United States Nonfarm Payrolls (NFP) data. Losses in the S&P500 futures are deepening in the Asian session as investors are getting worried that a fresh interest rate hike by the Federal Reserve (Fed) is escalating recession fears.

The US Dollar Index (DXY) is displaying back-and-forth action after reaching near 101.55 and is expected to extend upside amid the risk aversion theme. The 10-year US Treasury yields are facing sheer pressure and have dropped below 3.38%.

An interest rate hike of 50 basis points (bps) by the Bank of England (BoE) to 4% triggered a sell-off in the Pound Sterling on Thursday. On interest rate guidance, BoE Governor Andrew Bailey confirmed further interest rate hikes as the inflationary pressures are still in the double-digit figure. The central bank announced a tenth consecutive interest rate hike, however, the United Kingdom economy is not responding as expected. BoE Governor further cited that firms are expecting a decline in the employment cost ahead. It is worth noting that labor cost has been a major catalyst of stubborn inflation.

Going forward, investors will see a power-pack action after the release of the US NFP data. Analysts at TD Securities expect a 220K increase in payroll and a modest increase in the Unemployment Rate to 3.6%.