GBP/USD has posted considerable losses in the Monday session. Currently, GBP/USD is trading at 1.2685 down 0.41% on the day. On the release front, British numbers were unexpectedly soft. Monthly GDP dropped 0.4% in April, its second straight decline. There was no relief from Manufacturing Production, which plunged 3.9% in April, much weaker than the forecast of -1.1%. This was the largest decline since June 2002. In the U.S., there are no major events. JOLTS Jobs Orders slowed to 7.45 million, shy of the estimate of 7.50 million. On Tuesday, the U.K. releases wage growth and unemployment rolls, while the U.S. posts Producer Price Index reports.
The pound registered gains of close to 1.0% last week, as the U.S. dollar was broadly lower against the major currencies. Comments from Federal Reserve officials hinting at a rate cut sent the greenback lower. For most of the year, the Fed has sounded neutral about its next rate move, but last week’s U-turn was a dramatic development. Fed chair Jerome Powell said that the Fed would “act as appropriate to sustain the expansion”, and analysts noted that he did not mention his “patient” approach to monetary policy, which has been a buzzword in Powell’s recent comments. Powell’s remarks echoed comments from James Bullard, president of the St. Louis Fed. Bullard stated that the Fed might have to lower rates shortly due to low inflation and the ongoing trade war with China. The CME Group has set the odds of a quarter-point cut in July at 67%, as the likelihood a rate cut later this year is growing.
The U.S. ended the week on a sour note, as nonfarm payrolls posted its second dismal reading in four months. In May, the economy created only 75 thousand jobs, down from 263 thousand a month earlier. Wage growth was unchanged at 0.2%, shy of the estimate of 0.3%. Despite these soft job numbers, the U.S. labor market is in strong shape, and the greenback could quickly bounce back.
