GBP/USD back in low 1.29s, giving back a premature bid in the 1.30s

• GBP/USD underperformer overnight on a firm dollar heading into NFPs.
• EU/UK trade negotiation risk simmering away ahead of key BoE speaker next week. 

GBP underperformed overnight and cable was falling from 1.3000 to 1.2921 – for a six-week low. In Asia, we have seen minimal price action with the pair oscillating between 1.2924/36. 

The US dollar remains top dog in the FX space and the pound has continued to feel the pressures following the Bank of England rally correction which gathered pace below 1.3150 and on to break below the 1.30 handle twice to settle in the depths of the 1.29 handle at the end of the week. 

The market is adrift and it is unclear that this is a concerted effort to keep lower for longer at this juncture. However, UK/EU trade negotiations are definitely a risk and a potential spanner in the works. The Bank of England will also be a theme in coming weeks with the next meeting scheduled for March 26, ten days after Bailey succeeds Carney. 

We will have Monetary Policy Committee member Haskel speaking in Nottingham next Tuesday (Feb 11, 1700GMT). Haskel (and Saunders) voted for a rate cut at the last three MPC meetings so a dovish tone should be expected and a weight on the pound. However, the probability of a BoE rate cut on March 26 is currently a mere 7%. 

NFP coming up next

Meanwhile, in the more immediate future, we have the Nonfarm Payrolls and hourly earnings in the US session to end the week. 

“We expect a 170k monthly gain for payrolls (consensus is 165k) after 145k in Dec and a 0.3% rise in hourly earnings in the month, 3.0% year,” analysts at Westpac explained.

“While the January ADP print surprised to the upside, often it proves an inaccurate lead for the BLS release. The unemployment rate should remain at 3.5%. The Fed will release the semi-annual Monetary Report which will be presented to congress Tue/ Wed next week.”

GBP/USD levels