GBP/USD extends recovery above 1.1200 as market mood turns cheerful, US NFP buzz

• GBP/USD has extended Tokyo’s recovery above 1.1200 as the risk-off impulse has rebounded.
• Long-term US government bonds have surrendered the majority of their gains.
• Going forward, the US NFP data will be of utmost importance.

The GBP/USD pair has added more gains after overstepping the round-level resistance of 1.1200 in the Tokyo session. The Cable rebounded from 1.1150 after sensing a loss in the downside momentum. The risk impulse is turning positive as investors are shrugging off uncertainty ahead of the US Nonfarm Payrolls (NFP) data.

Meanwhile, the US dollar index (DXY) has slipped below 112.60 after struggling to cross the crucial hurdle of 113.00. The S&P500 futures have displayed a minor recovery after remaining sideways. While the 10-year US Treasury yields have surrendered the majority of their gains and have dragged to 4.14%.

On Thursday, the Pound bulls witnessed a steep fall after the Bank of England (BOE) announced a rate hike by 75 basis points (bps). The decision remained in line with the estimates but commentary from BOE Governor Andrew Bailey on UK’s recession situation weakened the Sterling. BOE Governor confirmed that the UK economy is in recession and the situation will last potentially two years more than observed in the period of the subprime crisis.

The recession situation indicates a negative growth rate in economic activities, which will compel the BOE not to go too heavy on interest rates further. This could lead to the widening of the Federal Reserve (Fed)-BOE policy divergence ahead.

On the US front, the release of US employment will support the market participants to make informed decisions ahead. As per the consensus, the US economy has added 200k jobs in the labor market vs. the prior release of 263k. Also, the Unemployment Rate is seen higher at 3.6%.