Title: GBP/USD marches towards 1.1700 on weaker DXY, US ADP Employment Change eyed
August 31, 2022 01:23 AM ET
The GBP/USD pair is gradually moving towards the round resistance of 1.1700 as the US Dollar Index (DXY) gave back Tuesday's gains. Cable extended its recovery after crossing the immediate resistance of 1.1675 and has reached the level of 1.1685 at the time of writing. The stock is expected to extend its gains as the DXY is expected to remain volatile.
The DXY has broken the consolidation formed in a narrow range of 108.67-108.88 in the Asian trading session to the downside. As investors have become cautious ahead of the US Nonfarm Payrolls (NFP) data, the strength of the DXY is weakening. The preliminary forecast suggests that the U.S. economy added another 300,000 jobs in August, down from the previous reading of 528,000. U.S. Automatic Data Processing (ADP) data to be released on Wednesday also influences the DXY. The economic data is seen at 200k. Tech companies are holding back on hiring, which is impacting the employment data.
As long as the U.S. economy is operating at full employment levels, 300k new jobs seems reasonable.
However, the data on average hourly wages could make things more difficult for Federal Reserve (Fed) policymakers. Price pressures have already affected household sentiment; therefore, higher payrolls are needed to offset the inflated payouts. Economic data is expected to improve marginally by 10 basis points (bps) to 5.3%.
A sparse economic calendar in the UK could give the DXY more responsibility for the direction of the cable. In the week ahead, investors will focus on the British Retail Consortium's (BRC) Like-For-Like retail sales. Earlier, the economic data landed at 1.6% annualized. Economic data is expected to remain higher as energy costs in the pound zone soar.