GBP/USD snaps the two-day losing streak, holds above 1.2600 ahead of US ADP data

• GBP/USD gains ground on the renewed USD weakness.
• US JOLTS labor data came in worse than expected, US ISM Services PMI arrived stronger than market expectation.
• The markets are now almost fully priced in a first BoE rate cut by June 2024.

The GBP/USD pair snaps the two-day losing streak and holds above the 1.2600 support level during the Asian trading hours on Wednesday. The modest decline of the US Dollar (USD) creates a tailwind for the pair. GBP/USD currently trades near 2607, gaining 0.11% on the day.

The US JOLTS labor data on Tuesday came in worse than expected. The US job openings data, as measured by the Job Openings and Labour Turnover Survey (JOLTS) dropped by 617,000 to 8.733M in October. The figure registered its lowest level since March 2021. The attention now shifts to November’s ADP job report on Wednesday, with an expected rise of 130K.

Additionally, the US ISM Services PMI for November grew to 52.7 from 51.8 in the previous reading, stronger than market expectation. The US employment data this week, including ADP Employment Change and Nonfarm Payrolls (NFP) will be in the spotlight as it could offer some hints about a further interest rate path. However, the market expects the Federal Reserve (Fed) to leave rates unchanged at its December meeting next week.

On the GBP’s front, the markets raise bets on an earlier start to interest rate cuts by the Bank of England (BoE). Financial markets are now almost fully priced in a first BoE rate cut by June 2024. BoE will release its monthly Financial Stability Report on Wednesday, providing investors with insight into how far the BoE is going towards a hawkish or dovish stance.

Traders will take more cues from the UK S&P Global/CIPS Construction PMI for November and the monthly Financial Stability Report. Also, the US ADP private employment and Unit Labor Cost data will be due later on Wednesday. These figures could give a clear direction to the GBP/USD pair.