Market Analysis

The British Pound (GBP) remains under pressure, hovering near the crucial 1.3100 level against the US Dollar (USD) during Monday's London trading session. The GBP/USD pair is weighed down by a strong US Dollar, which is holding firm near a seven-week high, bolstered by better-than-expected US Nonfarm Payrolls (NFP) data for September, released last Friday. The US Dollar Index (DXY), which measures the currency against a basket of six major peers, continues its six-day rally, climbing close to 102.50.

The September US labor market report indicated a robust economy, with payrolls increasing by 254K, the highest since March, and the unemployment rate falling to 4.1%. Average Hourly Earnings, a key indicator of wage growth that influences consumer spending, rose by 4% year-over-year, highlighting strong wage growth.

This unexpectedly positive labor data prompted traders to unwind bets on a more aggressive Federal Reserve (Fed) rate cut of 50 basis points (bps) in November. According to the CME FedWatch tool, the likelihood of a 50 bps cut has now been completely erased, with markets now anticipating a smaller quarter-point cut.

Chicago Fed President Austan Goolsbee praised the employment report, calling it "superb" and stating, "If we continue to see reports like this, I’ll feel more confident that we’re achieving full employment," according to Reuters.

Looking ahead, attention will shift to the US Consumer Price Index (CPI) data for September, set to be released on Thursday. This inflation report will offer further insight into the Fed’s potential interest rate decision in November.

Paraphrasing text from "FX Street" all rights reserved by the original author.