GBP/USD tumbles to the 1.2100 zone as Dollar jumps on upbeat NFP

The GBP/USD tumbled from 1.2250 to 1.2100, reaching the lowest level in three weeks after the NFP. During the last hour, it rebounded modestly rising  |  03/02/2023 14:51

• US jobs numbers surpass expectations in January, not earnings.
• US Dollar and Treasury bond yields soar after NFP.
• GBP/USD extends weekly losses as USD jumps on data.

The GBP/USD tumbled from 1.2250 to 1.2100, reaching the lowest level in three weeks after the NFP. During the last hour, it rebounded modestly rising toward 1.2150.

The data published by the US Bureau of Labor Statistics (BLS) revealed on Friday that Nonfarm Payrolls rose by 517K in January, much higher than the market expectation of 185K. November and December's figures were revised higher. The unemployment rate dropped to 3.4%.

The US Dollar rose sharply across the board after the report while US yields soared. At the same time, the Pound printed fresh monthly lows versus the Euro.

A bad end for a bad week

On a weekly basis, the GBP/USD is having the biggest decline since September at times of the UK government crisis. The result is the combination of a major recovery of the US Dollar during the last two days of the week but also on the back of a weaker Pound following central bank meetings.

On Thursday, as expected, the Bank of England raised the key interest rate by 50 basis points. Analysts at TD Securities point out the Monetary Policy Committee toned down its guidance on the pace of future hikes. "The vote was less dovish than expected (7-2) but language was softened to suggest a meeting-by-meeting approach to hikes from here".

Next week is light in terms of major data releases. Attention will be back of Federal Reserve officials after the latest FOMC meeting and today's employment data. Fed chair Powell is among the official that will speak.

In the UK, Q4 and December GDP data is due next Friday. "Further strikes, a fall in hospital visits, and heavy snowfall likely drove a sharp decline in Dec GDP. However, even this bad a monthly reading won't quite tip the UK into recession—for now at least", said TDS analysts.

Technical levels