Sterling recovers after post-NFP

The Sterling recovered after a post-NFP crash, pushing to new highs in mid-1.26. The US Bureau of Labour Statistics reported 253K new jobs and Average Hourly Earnings rose, suggesting persistent inflationary pressures.

This led to US Dollar buying that weighed on the pair. The GBP/USD has recovered all the losses from the post-report downswing and climbed back up to new year-to-date highs, currently standing at 1.2652. The Sterling is underpinned by UK monetary policy divergence with the US based on much higher inflation in the UK.

Regional banking fears remain a background thorn in the side of the US Dollar. Longs are favored over shorts. The US trading day began with stocks rising after Wall Street’s open, leading to a bounce back up to new highs.

The US Dollar gained after labor market data painted a positive picture of the jobs market, suggesting inflation will remain pressing. The Pound Sterling has gained ballast from overall outflows from the US Dollar and the Euro, as the US Fed and ECB are seen as having reached peak interest rates in the current hiking cycle.

The UK S&P Global Services PMI showed a higher-than-expected result of 55.9 versus the 54.9 no-change forecast, and Construction PMI out on Friday also beat expectations. The US dollar is suffering after renewed banking crisis fears in the US on the back of the news two more regional banks, PacWest and Western Alliance, are in trouble.