The Pound Sterling (GBP) is experiencing a slight decline of 0.10% against the US Dollar (USD) amid a quiet economic calendar in the United Kingdom. This movement follows a positive employment report from the United States, with GBP/USD currently trading at 1.3486 after reaching a peak of 1.3516 earlier in the day.
Market sentiment appears mildly risk-averse, evidenced by the CBOE Volatility Index (VIX), which has increased nearly 2% as traders opt for financial protection against potential reversals in US equities. This atmosphere has exerted additional pressure on the British currency.
Recent data from the ISM Services PMI indicates a robust increase in business activity within the US services sector, rising from a previous figure of 52.6 to 54.4, and surpassing expectations of 52.3. Key insights from the survey reveal significant improvements in the Employment subcomponent, which rose from 48.9 to 52. Moreover, the Prices Paid index saw a decline, dropping from 65.4 to 64.3.
In parallel, the Department of Labor reported a decline in job openings for November, with the total vacancies dropping from October’s 7.449 million to 7.146 million. The ADP Employment Change report for December showed that the economy added 41,000 jobs, falling short of the 47,000 estimates but marking an improvement over November’s report, which had revealed a loss of 29,000 jobs. Following these data releases, the US dollar managed to bounce back from intraday lows, applying downward pressure on Sterling. The US Dollar Index (DXY), which measures the dollar against six major currencies, rose 0.06% to 98.65.
As the GBP is also influenced by global equity market trends, investors turning risk-averse are further contributing to its current challenges. With a sparse economic schedule in the UK, traders are closely monitoring US economic updates and ongoing political uncertainties.
Looking ahead, Initial Jobless Claims for the week ending January 3 are anticipated to rise from 199,000 to 210,000. Additionally, Friday’s forthcoming release of December’s Nonfarm Payroll figures is expected to show an increase of 60,000 jobs, down from the previous reading of 64,000.
From a technical perspective, the GBP/USD pair is on track to record consecutive daily bearish candles, signaling the strength of the US dollar. Despite this trend, the pair has yet to fully shift into a bearish bias. The Relative Strength Index (RSI) data suggests a favorable position for buyers, although it has recently dipped below its latest low, approaching a neutral stance.
If the GBP/USD falls below the 1.3400 mark, a test of the 200-day Simple Moving Average (SMA) at 1.3379 could occur. Should it breach this level, further declines may push the exchange rate toward intermediate support at 1.3179, corresponding to the low recorded on December 2. Conversely, a daily closing above 1.35 could sustain buyer optimism, potentially enabling a re-test of the 1.36 level.
The week’s statistics illustrate the British Pound’s performance relative to major currencies, with the strongest showing against the Swiss Franc. The heat map detailing percentage changes showcases various fluctuations, highlighting the dynamics of the currency market during this period.
