Pound Sterling flattens against US Dollar on absence of US key economic data releases

The Pound Sterling (GBP) trades in a tight range around 1.3440 against the US Dollar (USD) during the European trading session on Friday. The GBP/USD pair consolidates as the US Dollar (USD) trades sideways, with investors struggling to find fresh cues regarding the economic outlook in the wake of partial government closure.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, wobbles around 97.90 at the time of writing.

The partial US government shutdown has resulted in halt of key economic data releases, including the Nonfarm Payrolls (NFP) report that was scheduled for this Friday, as a number of statistical agencies have been called off work due to the stoppage of government funding.

Investors were awaiting the US official employment release to get fresh cues on the Federal Reserve’s (Fed) monetary policy outlook. Currently, there is an 87% chance that the Fed will cut interest rates at all remaining policy meetings this year, according to the CME FedWatch tool.

Meanwhile, the US ADP Employment Change figures for September showed on Wednesday that the private sector saw a reduction in labor force by 32K employees. Economists had anticipated that 50K fresh workers were added in that period. Additionally, the report revealed that 3K employees were laid off in August against the previously calculated addition of 54K workers.

Pound Sterling trades broadly stable while UK labor market risks escalate

• The Pound Sterling trades calmly against its major peers on Friday while it will likely face selling pressure amid growing United Kingdom (UK) labor market concerns.
• Bank of England’s (BoE) Decision Maker Panel (DMP) survey showed on Thursday that firms’ year-ahead expectations for employment came in flat in the three months to September. This is the first time since the quarter to November 2020, when companies didn’t anticipate increasing their staff numbers.
• The survey also showed that the 12-month forward expected CPI inflation by the UK firms edged slightly higher to 3.5% in the quarter to September.
• The scenario of sticky inflation outlook and a slowing job market would force BoE officials to perform a delicate balancing act in the upcoming policy meetings.
• This week, BoE Deputy Governor Sarah Breeden argued in favour of reducing interest rates, citing economic risks that could bring inflation lower. On the contrary, BoE Deputy Governor Clare Lombardelli and Monetary Policy Committee (MPC) member Catherine Mann warned that recent inflation shocks should not be considered as temporary.
• In the August policy meeting, the BoE stated that inflationary pressures could peak around 4% in September.

Technical Analysis: Pound Sterling consolidates as RSI stays inside the 40.00-60.00 range

The Pound Sterling oscillates this Friday inside the previous day’s trading range around 1.3450 against the US Dollar. The GBP/USD pair struggles to return above the 20-day Exponential Moving Average (EMA), which trades around 1.3476.

The 14-day Relative Strength Index (RSI) rebounds to near 47.00. The pair would remain sideways if the RSI stays in the 40.00-60.00 range.

Looking down, the August 1 low of 1.3140 will act as a key support zone. On the upside, the September 17 high of 1.3726 will act as a key barrier.