GBP/USD drops under 1.3450 as NFP data reduces expectations for a Fed rate cut in January

Pound Sterling Pulls Back Following Mixed US Jobs Data

On Friday, the British Pound slipped after the release of December’s US Nonfarm Payrolls, which showed a blend of positive and negative signals. As a result, market participants scaled back expectations for a Federal Reserve rate cut in January. At the latest check, GBP/USD was trading at 1.3412, having earlier peaked at 1.3451.

US Employment Report Dampens Immediate Rate Cut Hopes

According to the US Bureau of Labor Statistics, only 50,000 new jobs were created, falling short of the anticipated 60,000 and the prior month’s 64,000. Despite this softer job growth, the unemployment rate improved, dropping to 4.4% from 4.6%, which was better than the projected 4.5%.

This data supported recent remarks from Federal Reserve officials, who have described the labor market as stable but stagnant. Following the report, traders significantly reduced the likelihood of a January rate cut, with odds falling from about 29% to just 5%.

Fed interest rate probabilities - Source: Prime Market Terminal

US Housing and Consumer Sentiment Data Disappoints

Meanwhile, US housing indicators also underperformed. October’s Building Permits slipped by 0.2%, moving from 1.415 million in September to 1.412 million. Privately-owned Housing Starts for October registered at 1.246 million, marking a 4.6% drop from the previous month’s 1.306 million.

On the consumer front, the University of Michigan’s preliminary January Consumer Sentiment reading came in at 54, slightly above the expected 53.5 and up from November’s final figure of 52.9. One-year inflation expectations remained steady at 4.2%, while five-year expectations edged higher from 3.2% to 3.4%.

In the UK, there were no major economic releases this week, but attention is turning to upcoming data. Next week, markets will be watching for the BRC Like-For-Like Retail Sales for December, new employment figures, and the latest GDP results.

GBP/USD Technical Analysis

The GBP/USD pair has continued its downward trajectory and is approaching the 200-day Simple Moving Average (SMA) at 1.3384. Should the pair close below this level, it could open the door for a move toward the 50-day SMA at 1.3288, with further downside potential toward 1.3200 if selling pressure persists.

On the other hand, a recovery above 1.3450 would be necessary for buyers to regain control, with the next target set at 1.3500 if momentum strengthens.

GBP/USD daily chart