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May 07 - 01:55 PM

GBP/USD - COMMENT-Huge US Payrolls Miss Leaves Sterling Bulls Contemplating 1.40

By Paul Spirgel  —  May 07 - 09:52 AM

Sterling rallied to a one-week high at 1.3972, further away from daily cloud top support by 1.3903, after U.S. non-farm payrolls EM undershot even the lowest forecasts, but bulls' hesitance left in doubt their ability to take 1.40 quickly.

With U.S. payrolls increasing by just 266,000 -- below the Reuters consensus forecast of 978,000 and range of 656,000 to 2.1 millionnL1N2MU107 -- cable pullbacks should be limited as the dollar weakens broadly, but big-figure and option resistance make 1.40 difficult to crack as long as UK data forestall BoE tapering.

Above 1.40 resistance comes at 1.4003, the upper 30-day Bolli and 1.4009 sterling's April 20 high, and other peaks on the way to Feb.
26's 1.4021 high.

Comments from BoE Deputy Governor Ben Broadbent nS8N2L3025 on the need for clear evidence of a sustainable return of inflation echo Fed caution nN9N2JM005.

Thursday's reduction of weekly gilt purchases merely put the BoE back on course to meet its GBP875bn target, lending sterling a hand but falling short of the decisive tapering and higher rates guidance needed for GBP/USD to eclipse its 2021 high at 1.4240.

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Source:
Refinitiv IFR Research/Market Commentary

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