Pound Sterling rises further against Greenback on weakening US job market

• The Pound Sterling rises to near 1.3500 against the US Dollar amid the US job market slowdown.
• The US government shutdown could escalate already weakening job conditions.
• BoE’s Breeden argues in favour of unwinding monetary policy restrictiveness.

The Pound Sterling (GBP) ticks up to near 1.3500 against the US Dollar (USD) during the European trading session on Thursday. The GBP/USD pair edges higher as the US Dollar (USD) remains on the backfoot, with the United States (US) job market slowing down and the government entering a shutdown.

At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades vulnerable near the weekly low around 97.50.

On Wednesday, the US ADP Employment Change report showed that the private sector labor force witnessed a reduction of 32K employees in September. Economists had anticipated that 50K fresh workers would be added in that period. Additionally, the report revealed that 3K employees were laid off in August compared to the fresh addition of 54K workers initially reported.

Signs of a cooling US job market have boosted expectations for more interest rate cuts by the Federal Reserve (Fed) in the remainder of the year. According to the CME FedWatch tool, traders have almost fully priced in that the Fed will cut interest rates by 25 basis points (bps) to the 3.75%-4.00% range in the policy meeting later this month.

Daily digest market movers: Pound Sterling ticks up against its peers

• The Pound Sterling trades slightly higher against its major peers, except the New Zealand Dollar (NZD), on Thursday. However, the outlook of the British currency has become uncertain as Bank of England (BoE) officials have started expressing concerns over cooling United Kingdom (UK) economic prospects.
• On Tuesday, BoE Deputy Governor Sarah Breeden warned that tight monetary policy conditions could push inflation below their 2% target, which has been a major reason forcing officials to maintain a “gradual and careful” monetary easing outlook. “Risks in holding policy too tight for too long, could pull inflation below target,” Breeden said.
• The comments from Breeden signaling a turnaround in inflationary pressures could boost expectations of more interest rate cuts by the BoE in the near term.
• At the August policy meeting, the BoE stated that price pressures would peak around 4% in September.
• In the US region, investors brace for further slowdown in the US job market as the White House has warned that they could announce mass lay-offs in the wake of the government shutdown. "Unfortunately, because the Democrats shut down the government, the president has directed his Cabinet and the Office of Management and Budget is working with agencies across the board to identify where cuts can be made, and we believe that layoffs are imminent," White House press secretary Karoline Leavitt said, Reuters reported.
• In Thursday’s session, the US Department of Labour is unlikely to post the Initial Jobless Claims data for the week ending September 27, as the government remains shut down at the time of writing.

Technical Analysis: Pound Sterling extends winning streak

The Pound Sterling extends its winning streak against the US Dollar for the fifth trading day on Thursday. The GBP/USD pair strives to extend its upside above the 20-day Exponential Moving Average (EMA), which trades around 1.3485. The return of the Cable above the 20-day EMA will shift the near-term trend to positive.

However, the pair would remain sideways if the 14-day Relative Strength Index (RSI), currently at 50.61, 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.