GBP/USD trades on a stronger note 1.2530, all eyes on US NFP data
- GBP/USD holds positive ground near 1.2540 on the weaker USD on Friday.
- The Fed held interest rates steady on Wednesday.
- The BoE is expected to leave rates unchanged for the sixth time in a row at its meeting next week.
The GBP/USD pair trades on a stronger note around 1.2540 amid the softer US Dollar (USD) on Friday during the early Asian session. The US Federal Reserve (Fed) Chair Jerome Powell delivered a modest dovish message after the meeting on Wednesday, which weighs on the Greenback. However, the ongoing backdrop of elevated inflation and robust growth in the US should keep the Fed on hold and maintain the higher-for-longer narrative, which might support the USD. Later in the day, the US S&P Global Services PMI will be due, along with the US employment data for April.
The Fed decided to leave its key interest rate steady at the highest level in more than two decades, in the range of 5.25%–5.5%, where it has stood since last July. The US central bank acknowledged the worsening inflation outlook, citing that there has been a lack of further progress toward the Fed's 2% inflation target in recent months.
Fed’s Powell emphasized that it’s unlikely that the next policy rate move will be a hike, adding that rate cut timing will depend on the data and that the unexpected weakening in the labor market could warrant a cut. Investors will closely monitor the US April Nonfarm Payrolls (NFP) on Friday. In the case of weaker-than-expected data, this could exert further selling pressure on the USD and create a tailwind for the GBP/USD pair.
On the other hand, the Bank of England (BoE) will announce its interest rate decision next week. The BoE is anticipated to hold interest rates steady at 5.25% for the sixth time in a row, while the markets have fully priced in the first rate cut in September. Market players will take more cues from the inflation outlook and cues about when the BoE will start cutting interest rates.