GBP/USD subject to further weakness following an upbeat US NFP report

• The Pound Sterling nosedived to 1.2133 once the headline crossed newswires.
• US November’s Nonfarm Payrolls crushed estimates, and wages rose.
• Traders focus on Chicago Fed Charles Evans’s speech around 15:00 GMT.

The GBP/USD dived from around 1.2290s close to 100 pips following a better-than-foreseen labor market report in the United States (US), suggesting that further central bank tightening is needed. However, in the aftermath of the US employment report, the GBP/USD is trading around 1.2210s, after traveling towards its daily low of 1.2133, on the market’s reaction to US headline data.

US equity futures remain downbeat after the November US Nonfarm Payrolls rose by 263,000 following an upward revision of 284,000 jobs added in October, the Department of Labor (DoL) report showed. Delving into the information, the Unemployment Rate stood at 3.7%, while Average Hourly Earnings put upward pressure on inflation, jumping 5.1% YoY, vs. 4.6%, consensus. Given that Federal Reserve (Fed) policymakers agreed that moderating the pace of rate hikes is appropriate, it would be interesting to see Fed officials’ postures, led by the Chicago Fed President Charles Evans, crossing newswires around 15:00 GMT.

The US Dollar Index (DXY), a gauge of the buck’s value against a basket of six currencies, after hitting six-month lows around 104.377, stages a mild recovery, reclaimed the 105.000 figure up 0.32%.

Aside from this, a weaker Institute for Supply Management (ISM) Manufacturing PMI report for November on Thursday flashed signs of activity contraction, shifted sentiment sour, spurring flows towards safety, except for the US Dollar (USD). On the inflation side, the Fed’s preferred gauge for inflation, the core Personal Consumption Expenditure (PCE) for October, rose by 5% YoY, below the previous month’s 5.2%, aligned with estimates.

An absent UK economic calendar leaves the GBP/USD pair adrift to the US Dollar dynamics. Given that the GBP/USD reached a fresh 5-month high at 1.2311, it was achieved on a soft USD after the Federal Reserve Chair Jerome Powell said that moderation on the speed of rate increases was “appropriate” Wednesday.

Ahead in the calendar, the US economic docket will feature the Chicago Fed President Charles Evans, ahead of the Fed’s blackout period, at the upcoming December monetary policy meeting.

GBP/USD Key Technical Levels