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Pound Sterling (GBP) held gains against the US Dollar (USD) around 1.2770 during the European session on Friday. GBP/USD rallied sharply on Thursday after U.S. data on initial jobless claims for the week ended November 29 showed the number of people filing for unemployment benefits rose to 224,000, compared with estimates and the previous week’s reading. 215,000.
GBP trading is expected to be thin ahead of the release of US November non-farm payrolls (NFP) data at 13:30 GMT. Investors will be closely watching official U.S. labor market data for new clues on whether the Federal Reserve will cut interest rates at its policy meeting on December 18. The Fed began its policy easing cycle in September as officials worried about worsening labor demand and were confident that inflation would return to the bank’s 2% target.
Economists expect the U.S. economy to add 200,000 jobs, up from 12,000 in October. Wage growth slowed significantly last month as some industries were affected by hurricanes and strikes occurred at Boeing plants. The unemployment rate is estimated to have risen to 4.2% from 4.1%.
Investors will also focus on average hourly earnings data, a key measure of wage growth, which is expected to rise 3.9% year over year, slower than October’s 4% increase. On a monthly basis, the wage growth gauge is estimated to have slowed to 0.3% from 0.4% previously.
Signs of slowing labor demand and modest wage growth will fuel dovish bets on the Federal Reserve’s December 18 policy meeting. Conversely, strong employment data would undercut dovish bets. Currently, according to the CME FedWatch tool, the probability that the Federal Reserve will cut interest rates by 25 basis points this month to 4.25%-4.50% is 72%, and the rest supports keeping interest rates unchanged.
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