GBPUSD defends recovery from seven-month low on US Dollar pullback

Markets remain slightly positive on early Thursday as the bond rout pauses after late Wednesday’s downbeat US data and questions about the US credit rating, especially amid the political upheaval and the mixed updates about the US-China ties. Also, improvement in the data ex-US, as well as consolidation ahead of Friday’s US Nonfarm Payrolls (NFP) plays their roles to tame the previous risk-off mood and challenge the US Dollar’s haven demand.

With the US Dollar’s retreat, the Gold Price prints the first daily gains in nine while the Crude Oil licks its wounds after the previous day’s heavy slump. That said, the AUDUSD appears the biggest G10 currency pair winner against the Greenback as the USD retreat joins the upbeat Aussie trade balance.

It should be noted that the hawkish tone of ECB and BoE officials, published earlier in the week, allowed EURUSD and GBPUSD to pare recent losses. USDCAD and USDCHF, however, lack clear directions. Furthermore, USDJPY traces the retreat in yields amid concerns that the Japanese policymakers defend the Yen price of late via market intervention.

Moving on, Wall Street closed with mild gains and the Asia-Pacific shares edged higher. However, the European and the British equities lack clear directions of late.

Even so, BTCUSD and ETHUSD remain pressured and please sellers amid broad crypto market fears.

Following are the latest moves of the key assets:

• Brent oil pares the biggest daily loss since July 2022 with mild gains around $86.50 by the press time.
• Gold price remains defensive around $1,825 as bears lick their wounds at seven-month low after eight-day losing streak.
• USD Index stays defensive around 106.75 as we write, after refreshing the yearly high on Tuesday.
• Wall Street closed with mild gains while the Asia-Pacific stocks edged higher. Even so, equities in Europe and the UK remain lackluster at the latest.
• BTCUSD and ETHUSD print minor losses around $27,600 and $1,640 as we write.

US data allow markets to consolidate recent moves…

US statistics finally tested the hawkish Fed bias, as well as the US Dollar bulls, the previous day. Also challenging the Greenback and allowing the riskier currencies to pare weekly losses were the US credit rating concerns and data outside the US which came in mostly upbeat.

US ADP Employment Change for September dropped to the lowest level since January 2021 by printing the 89K addition to the private workforce versus 154K expected and 180K (revised) prior. Further, the US ISM Services PMI for September matched 53.6 market forecasts, easing from 54.5 previous readings. It should be noted that the US S&P Global Composite PMI improved to 50.2 versus 50.1 previous readings while Services PMI eased to 50.1 versus 50.2 initial estimations. Alternatively, the US Factory Orders for August grew 1.2% MoM versus -2.1% previous forecasts and 0.3% market forecasts. On Wednesday, ex-Fed Vice Chair Richard Clarida spoke in an interview with Bloomberg and signaled the Fed’s policy pivot, which in turn joined concerns about the US rating status to weigh on the US Dollar.

Goldman Sachs said that the removal of the US House of Representatives speaker boosts the chances of a US government shutdown in mid-November. However, the global rating agency Fitch defends its August month downgrade of the US credit rating while ruling out any further negative actions for the US AA+ rating. That said, the rating giant signaled the latest political brinkmanship around government funding negotiations in the US as an important hurdle for the world’s biggest economy.

It should be noted that the firmer prints of the Eurozone PPI and PMIs from Germany, the UK and the Eurozone have helped tease the US Dollar sellers at the yearly top. However, the greenback bears aren’t convinced ahead of Friday’s key US jobs report and hence traders should keep their eyes on more signals to defend the Greenback bulls rather than taking the risk of trading against the trend.

• Strong buy: USDCAD
• Strong sell: ETHUSD, GBPUSD, Gold
• Buy: USD Index, Nasdaq, USDJPY
• Sell: DAX, FTSE 100, BTCUSD, AUDUSD, EURUSD

Second-tier data eyed

US Jobless Claims, Canada PMI and ECB talks decorate Thursday’s economic calendar. However, the qualitative catalysts will gain major attention and hence signals for the Fed’s next move, US economic strength and the US political drama should be eyed closely for clear directions.

May the trading luck be with you!