Poor UK data could impose pressure on the GBP

The change in the Bank of England’s rhetoric is favouring additional interest rate hikes in the upcoming policy meetings. Meanwhile, poor UK data is expected to drag the British Pound lower.

The GBP/USD pair has fallen this afternoon, as the US Non Farm Payrolls data pointed to a surprise surge of jobs created.

The print at 517,000 above forecasted 185,000, the data pointed to a red-hot labour market. Wage growth has fallen in January. Investors grow worried that the Fed could continue with tightening.

While the dollar is soaring, the Pound Sterling was also able to gain ground against most other peers today as the final services index printed above forecast. The slowed rate of contraction brought cheer to GBP investors and allowed it to recover some losses.

At the time of writing, GBP/USD is trading around US$1.2059, a fall of roughly 1.34% from the previous clsing at 1.2223 on Wednesday.

The US dollar has found further traction on the back of the January US jobs report. The Euro has managed to climb against the GBP that encounters pressure. This pressure is partly because of the market’s interpretation that the BoE’s language, reflecting that it may be closer to peak policy rates.

The EUR/GBP continues to edge towards 0.90 target. The pair is trading at 0.8963 at the time of writing. Weak productivity, low investment growth, high inflation, recession conditions and a current account deficit are all likely to weigh on GBP in the new year.

Economists continue to expect EUR/GBP to grind higher to 0.90 by the middle of the year and while markets see scope for another move below GBP/USD 1.20 on a 3-month view.