The GBP/USD pair is marching towards a positive daily close for the second straight day as the greenback struggles to preserve its recovery momentum. At the moment, the pair is trading at 1.2970, gaining 0.28%, or 35 pips, on the day.
Although the US Dollar Index managed to float above the 96 handle during the Asian session, it failed to extend its rebound as the uncertainty regarding the FOMC’s next monetary policy forced European traders to take long USD positions. Moreover, the dismal private sector employment growth further hurt the greenback, pushing the index to its three-day low at 95.56. As of writing, the index was at 95.60, down 0.4% on the day.
On the other hand, hawkish comments from the BoE Policymaker Ian McCafferty helped the cable stay resilient against its rivals. McCafferty suggested that the BoE could start tightening its monetary policy if the economy matches the forecasts. He further added the big pick-up in the inflation was something that the MPC couldn’t ignore.
Tomorrow’s Industrial Production and Manufacturing Production data from the U.K. will give a better idea about the recent state of the economy. However, the market reaction to these data could stay limited ahead of the important Nonfarm Payroll report from the U.S. Markets expect the NFP to rebound to 179K from in June 138K in May. Although today’s ADP report points to a weak NFP reading, the fact that the correlation between the NFP and ADP had been weak lately suggests that a positive number is still possible.
Valeria Bednarik, Chief Analyst at FXStreet, writes “…although gains beyond the critical 1.3000 threshold are still in doubt, as the pair has been unable to sustain gains beyond it this year, topping in May at 1.3047. In the short term, the 4 hours chart shows that the price recovered after meeting buying interest around the 23.6% retracement of its latest daily rally at 1.2925, while also setting above the 20 SMA that lost its bearish strength. In the same chart, technical indicators aim modestly higher, with the RSI at 59, but the Momentum still stuck around its mid-line.”