The British Pound (GBP) experienced a significant rebound against the US Dollar (USD) on Friday, recovering from an 11-week low. Despite a stronger-than-expected US Dollar following the release of the October Non-Farm Payrolls (NFP) data, the GBP/USD pair remained relatively steady. The NFP report revealed a surprising decline of 12,000 jobs, significantly lower than the estimated 113,000 and the revised 223,000 from September. This unexpected weakness in the US labor market was primarily attributed to the impact of hurricanes in Florida and airline industry strikes. However, the unemployment rate remained unchanged at 4.1%, and average hourly earnings rose by 4% year-on-year, aligning with expectations. While the NFP data initially supported a potential rate cut by the Federal Reserve, subsequent economic indicators painted a more mixed picture. The manufacturing Purchasing Managers' Index (PMI) fell to 46.5 in October, signaling a contraction in manufacturing activity. Although economists anticipate a slower pace of contraction in the coming months, the data still suggests a weakening US economy.
Looking ahead, the Federal Reserve's interest rate decision on Thursday will be a crucial factor influencing the direction of the US Dollar. Market expectations point to a 25 basis point rate cut to the target range of 4.50%-4.75%. From a technical perspective, the GBP/USD pair has shown signs of a potential bullish reversal. The Stochastic oscillator has formed a bullish crossover in the oversold zone, and the Relative Strength Index (RSI) has dipped below the 50 level, indicating oversold conditions. A consolidation above the current level could lead to further upside, with the next resistance level at the 23.6% Fibonacci retracement of the recent uptrend at 1.3165. A break above the 20-day moving average at 1.3235 could strengthen the bullish momentum and potentially target the February 2022 high of 1.3635. In conclusion, the British Pound's resilience against the US Dollar can be attributed to a combination of factors, including a weaker-than-expected US labor market, potential Federal Reserve rate cuts, and oversold technical conditions. However, the overall direction of the pair will depend on the interplay of various economic and geopolitical factors, including the Federal Reserve's monetary policy stance and global market sentiment.
