GBP/USD Rises Near 1.2700 Ahead of US Non-farm Payrolls Data

GBP/USD is trading higher for the third consecutive day in Asia on Friday, trading around 1.2690. The pound’s gains may be due to improved UK data released on Thursday. However, upbeat data from the US may have capped GBP/USD’s gains.

UK Consumer Credit showed personal borrowing rose to £2.005 billion in November from £1.411 billion previously (revised to £1.289 billion). Additionally, the S&P Global/CIPS Composite Purchasing Managers’ Index rose to 52.1 in December from the previous reading of 51.7. Meanwhile, the services PMI rose to 53.4 from the previous reading of 52.7.

Sterling (GBP) may come under selling pressure due to the pessimistic economic outlook. British business executives have urged the Bank of England (BOE) to quickly cut interest rates to provide much-needed support to the struggling economy. The Institute of Directors Economic Confidence Index survey further highlights the continued decline in UK directors’ optimism about the country’s economic prospects over the next 12 months.

The U.S. dollar index remains calm after recent losses, trading around 102.40. A pullback in U.S. Treasury yields could weigh on the U.S. dollar (USD). As of press time, the two-year U.S. Treasury yields and the 10-year U.S. Treasury yields were 4.37% and 3.99% respectively.

However, encouraging employment data released on Thursday provided support for the dollar. The U.S. ADP employment change rose sharply in December, with 164,000 new jobs added, exceeding the previous value of 101,000 and the expected value of 115,000.

Initial jobless claims for the week ended December 29 showed positive signs, falling to 202,000 from the previous 220,000, exceeding expectations of 216,000. Separately, the S&P Global Composite Purchasing Managers’ Index reported a slight decline in business activity, recording 50.9 versus consensus expectations of 51.0.

Traders are awaiting further data on the U.S. labor market, including key indicators such as average hourly earnings and nonfarm payrolls (NFP) in December. In addition, the ISM Services PMI will also provide a signal on the current status of the U.S. services industry.

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