The British Pound (GBP) has surged to a fresh three-week high against the US Dollar (USD). It is leaking lower and trading near 1.3580 as we write during the European trading session on Tuesday. This marks a significant upward shift for the GBP/USD pair, which has gained traction throughout the session, advancing towards the pivotal 1.3600 level after experiencing modest gains on Monday. For now, there is bearish pressure prevailing on the US Dollar. Traders are preparing for the release of the much-anticipated Nonfarm Payrolls (NFP) benchmark revision report.
Recent GBP/USD price action illustrates the dramatic turn. The pair, for its part, has now mapped three days of straight gains on the trading day. Market analysts cite a number of reasons behind this increase. Chief among them is the fundamental strength of the US Dollar, which continues to be weak recently falling below six-week low of about 97.30 on the US Dollar Index (DXY).
GBP/USD Performance and Trends
For example, on Tuesday, GBP/USD pierced a trendline and rallied hard during the European session. It caught fire and moved steadily toward the 1.3600 barrier. The week prior had kicked off with a rather negative overall sentiment for the USD. Exploiting this underlying weakness, the Pound Sterling experienced a huge increase in demand.
As we prepared to leave last Friday for the weekend, the news arrived like a thunderclap with the execrable 22,000 rise in Nonfarm Payrolls for August. That weak performance continued to hold the USD suppression button down hard. Sluggishness in the increase of jobs is spooking investors. They are concerned about the robustness of the US economy and its overall direction and trajectory towards recovery. As a result, market participants are closely monitoring the upcoming NFP benchmark revision report set to be published at 14:00 GMT.
The US Dollar is collapsing rapidly. This continuing decline certainly makes the GBP/USD an attractive buy. Market experts note that optimism for GBP becomes more entrenched with each passing day. Labor market news is what traders are most looking forward to.
Factors Impacting US Dollar
The US Dollar Index (DXY), which measures the value of the USD against six major currencies, has been under intense scrutiny as it approaches its recent six-week low. The dollar is under a potent multi-pronged bearish offensive to be sure. Market reactions to historical labor data and anticipatory perception surrounding future economic indicators have contributed greatly towards this fall.
Market analysts are already convinced that the next NFP benchmark revision report will be impactful enough to change investor sentiment. We think this report will be very impactful on the USD. A reworking that reinforces current weakness in the pace of job growth would be an unfortunate reversal of fortune. That could exacerbate any declines in the dollar’s value.
Additionally, with economic uncertainty on the horizon, many investors are favoring risk-averse strategies which do not support USD relative to other currencies, such as GBP. This mix of factors has coalesced into an environment where the GBP has been able to flourish against its American counterpart.
Market Reactions and Future Outlook
While GBP/USD climbs further up on wings of global Dollar weakness, market responses show an increasing faith in the Pound Sterling’s resilience. Fuels traders more optimistic further gains are possible, especially if economic data scheduled in coming days leans that way. The suspense that shrouds the NFP revision report creates a whole second layer of complexity to market dynamics.