Short-term opportunities for the pound | 05 September 2024

Events to watch out for today:

15:30 GMT+3. USD - Number of initial claims for unemployment benefits

17:00 GMT+3. USD - ISM Index of Business Activity in the Services Sector

GBPUSD:

GBP/USD traded with a positive bias near 1.3155 during the Asian session on Thursday, although it lacks strong follow-through buying and remains below the weekly top reached yesterday.

The British Pound (GBP) continues to receive support from expectations that the Bank of England's (BoE) rate cut cycle will be slower than in the Eurozone or the US. Rates were supported by a survey from the British Retail Consortium which showed that spending rose 1.0% year-on-year in August, the strongest growth since March. This, along with a weakening US Dollar (USD), was a key factor that provided support for the GBP/USD pairing.

The Job Openings and Labour Turnover Survey (JOLTS) published on Wednesday showed that vacancies fell to 7.673 million in July, the lowest since January 2021. In addition, dovish remarks from Fed officials raised the stakes for a larger interest rate cut at the upcoming FOMC meeting on 17-18 September and drove US Treasury yields to more than a one-year low. This, in turn, has kept US Dollar bulls on the defensive and provided some support to the GBP/USD pair.

Nevertheless, cautious market sentiment is helping to limit the downward trend for the safe-haven dollar. Traders are also disinclined to make aggressive directional bets ahead of the crucial monthly US employment data, known as the Non-Farm Payrolls (NPF) report, which will be released on Friday. This, in turn, is limiting the GBP/USD pair's upside. Nevertheless, the fundamental backdrop seems to be leaning in favour of the bulls and suggests that the path of least resistance for spot prices lies to the upside.

On Thursday, investors will be focused on US economic data: the ADP private sector employment report, the usual weekly initial jobless claims and the ISM services PMI. This data, as well as US bond yields and broader risk sentiment, could drive demand for the US Dollar and create short-term trading opportunities for GBP/USD later in the early North American session.

Trading Recommendation: Watch the level of 1.3190, if consolidated above we take Buy positions, if rebounded we take Sell positions.

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