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GBP/USD is back above the 1.2700 mark during early Asian trade on Friday. The Bank of England (BOE) decided to hold interest rates steady at 5.25% at its January meeting on Thursday, citing the need to see more evidence that inflation will continue to fall. Investors are awaiting Friday’s U.S. non-farm payrolls (NFP) data to inject new impetus into the market. The pair is currently trading around 1.2745, down 0.01% for the day.
The Fed said it would hold off on cutting interest rates until it sees more evidence that inflation remains under control. Federal Reserve Chairman Jay Powell said on Wednesday that a rate cut at the March meeting was not the central bank’s “base case.
The latest manufacturing purchasing managers’ index (PMI) survey released by S&P Global on Thursday showed that the U.S. manufacturing purchasing managers’ index (PMI) improved significantly in January, rising to 49.1 from 47.1 last month. Attention will turn to U.S. non-farm payrolls (NFP) data later on Friday for further clarity on the path of interest rates. Traders have put the probability of a rate cut in May at 96%, according to the CME FedWatch tool.
The Bank of England kept interest rates unchanged at 5.25% on Thursday, but lower inflation could mean borrowing costs will fall around the third quarter of 2024. Bank of England Governor Andrew Bailey said that the Bank of England has seen good news on inflation over the past few months and they need to see more evidence that inflation will fall to the 2% target before cutting interest rates.
U.S. labor market data for January will be released on Friday, including nonfarm payrolls, the unemployment rate and average hourly earnings. The U.S. economy is expected to add 180,000 jobs in January, compared with 216,000 in December.
