The Pound Sterling struggled for footing Friday, hovering around $1.2670 as risk appetite soured ahead of crucial US economic data. Investors grappled with the UK’s potential recession risks and tough choices facing the Bank of England (BoE).
Sterling Stumbles on Recession Fears:
- A possible technical recession and weak manufacturing data paint a gloomy picture for the UK economy.
- Investors worry the BoE might be stuck between fighting inflation and preventing a deeper downturn.
US Jobs Data in Focus:
- Nonfarm payrolls data for December, due at 13:30 GMT, could influence the GBP/USD pair.
- Moderate job growth (170k predicted) might ease recession fears and boost Sterling, but better-than-expected data could strengthen the Dollar.
- Wage growth and jobless claims also in focus, with slower wage growth potentially favoring Sterling.
Mixed Signals from UK Economy:
- Services sector expands, offering a silver lining despite manufacturing woes.
- BoE faces a balancing act: early rate cuts could risk fueling inflation, while inaction worsens recession fears.
Technical Outlook:
- Pound Sterling faces potential downside towards $1.2500 if it breaks below $1.2625.
- Momentum oscillators hint at sideways movement in the near term.
In Short:
- Sterling faces headwinds from recession fears and a cautious market mood.
- US jobs data could be a key catalyst, with moderate growth favoring Sterling.
- The BoE’s policy stance adds further uncertainty to the Pound’s outlook.
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