GBP/USD holds below 1.2600 ahead of US NFP data

• GBP/USD remains confined around 1.2586 ahead of the key US event.
• The Bank of England (BoE) is likely to maintain the interest rate at 5.25% at its December meeting.
• US Initial Jobless Claims rose 220K vs. 218K prior, Continuing Claims dropped to 1.861M vs. 1.925M prior.
• US Nonfarm Payrolls will be a closely watched event by traders.

The GBP/USD pair consolidates in a narrow range of 1.2583–1.2600 during the early Asian session on Friday. Traders prefer to wait on the sidelines ahead of the highly anticipated US Nonfarm Payrolls report. At press time, the major pair is trading at 1.2586, down 0.02% on the day.

The Bank of England (BoE) is likely to keep the interest rate at 5.25% next week and through the second quarter of 2024. Markets have fully priced in a quarter-point rate cut by BoE in June of next year, followed by another in September. However, BoE Governor Bailey said interest rates would need to remain high for an extended period, and we are not currently in a position to discuss interest rate cuts.

Additionally, the BoE’s Financial Policy Committee suggested riskier corporate borrowing in financial markets such as private credit and leveraged lending is particularly vulnerable in the high interest rates and persistent inflation environment.

On the other hand, the US Initial Jobless Claims rose 220K in the week ending December 2 from 218K in the previous week. Meanwhile, Continuing Claims dropped to 1.861M from the previous week of 1.925M. Traders will take cues from the US employment data on Friday. The US Nonfarm Payrolls is estimated to rise by 180K in November. The stronger-than-expected data could lift the Greenback and cap the upside of the GBP/USD pair.