GBP/USD struggles to regain balance ahead of key labor data
GBP/USD tumbled on Wednesday, falling back below the 1.3600 handle in a sharp plunge fueled by a sharp increase in UK bond yields. Intraday bidding action managed to shave off the worst of the lows, but Cable price action is still poised for further downside as the Pound Sterling and US Dollar race to the bottom.
UK Prime Minister Kier Starmer and his government failed to deliver on welfare cuts, a key principle of his budget proposals to bring UK government financing back under control. PM Starmer also left the possibility of tax hikes on the table, drawing the ire of markets and political critics. Further government instability is on the cards for the UK, as PM Starmer is expected to begin shuffling his cabinet in a move to consolidate and maintain his party’s control in the face of a mucky economic outlook.
US ADP Employment Change figures also missed the mark on Wednesday, contracting by 33K net job gains in a sharp reversal of market forecasts for modest growth. ADP tends to serve as a popular (albeit shaky) forecast of US Nonfarm Payrolls data. Despite a breakdown of the correlation between ADP and NFP jobs numbers, this week’s ADP report has left investor reeling as they second-guess their expectations for the US economy.
Source: FXstreet
