GBPUSD licks Fed/BOE-led wounds near 1.1150 ahead of US NFP

GBPUSD bears take a breather at three-week low after falling the most in 1.5 months.
BOE’s 75 bps rate hike couldn’t lure bulls amid recession woes.
Hawkish Fed, geopolitical/covid concerns also underpinned US dollar strength.
US employment data for October appears crucial for immediate directions, bears are likely to keep the reins.

GBPUSD steadies around a three-week low near 1.1160 following the biggest daily slump in 1.5 months as traders prepare for the US employment data for October during early Friday. Also keeping the Cable pair sidelined is the lack of major data/events.

Bank of England (BOE) hiked the monetary policy rate by 75 bps to 3.0% while matching the market forecasts. The “Old Lady”, as the BOE is informally known, also increased the inflation projections while cutting down the Gross Domestic Product (GDP) predictions from September forecasts. The central bank policymakers also signaled the longest and the shallowest economic recession ahead.

Following the rate announcements and the economic forecasts, BOE Governor Andrew Bailey said, “Bank rate may have to go up further.” The policymaker also stated that they maybe have the largest upside risk in inflation forecasts in MPC history.

The dovish rate hike from BOE drowned the GBPUSD prices and directed the bears toward the lowest levels since October 21. The quote’s bearish moves gained extra support from the market’s risk-off mood and strong US Treasury yields.

It should be noted that the mixed US data couldn’t stop the major currency pair from declining further. That said, US ISM Services PMI for October dropped to 54.4 from 56.7 prior and 55.5 market consensus. However, the Factory Orders matched 0.3% forecast versus 0.2% upwardly revised previous readings. It should be noted that the US S&P Global Composite PMI and Services PMI got an upward revision from their preliminary readings for the stated month whereas the Initial Jobless Claims eased to 217K for the week ended on October 28 versus 220K expected and 218K prior.

While portraying the mood, the Wall Street benchmarks closed in the red while the US 10-year Treasury yields refreshed a one-week high to 4.22% before retreating to 4.15%. Notably, the US 2-year bond coupons rose to the highest levels since 2007.

Moving on, GBPUSD may witness further grinding amid a lack of major data/events ahead of the US employment report for October. Forecasts suggest that the headline US NFP could ease to 200K in October from 263K prior while the US Unemployment Rate may increase to 3.6% from 3.5% prior. That said, the downbeat forecasts for the scheduled statistics signal a corrective bounce in case of a surprise. However, strong outcomes will allow bears to challenge the previous monthly low.

Also read: US October Nonfarm Payrolls Preview: Analyzing gold’s reaction to NFP surprises