GBP/USD breaks below 1.3450 in response to weaker labor market data – Fed withdraws plans for January

British Pound Loses Ground After December US Employment Data Release

Thursday’s session brought selling pressure on the GBP/USD pair, which was clearly affected by the release of non-farm employment data in the United States. The currency pair fell below the 1.3450 level and is currently quoted at 1.3412, reflecting the weakening of the British pound amid changing market expectations regarding future Federal Reserve monetary policy decisions.

US labor market sends mixed signals – employment disappoints, unemployment improves

According to data from the US Bureau of Labor Statistics, the American economy created only 50,000 new jobs – a result significantly below the forecast (60,000) and weaker than the previous month’s (64,000). However, the same report also contained positive signals: the unemployment rate improved, falling from 4.6% to 4.4%, which was better than market expectations (4.5%).

These conflicting indicators forced investors to radically reset their scenarios regarding interest rate policies. After the report’s publication, the probability of a rate cut by the Federal Reserve in January decreased dramatically – from about 29% to just 5%. Fed officials previously commented that the labor market remains stable, although showing signs of stagnation, which, combined with the new data, clearly indicates a lack of urgency in lowering financing costs.

Real estate and consumer sentiment markets add uncertainty

The real estate sector delivered another disappointment. Building permits in October fell by 0.2% – from 1.415 million to 1.412 million units – and new residential construction starts decreased more noticeably, by 4.6%, from 1.306 million to 1.246 million.

On the consumer demand front, the preliminary reading of the University of Michigan consumer sentiment index for January slightly exceeded expectations (54 versus 53.5) and surpassed the final November result (52.9). However, long-term inflation expectations increased from 3.2% to 3.4% over five years, signaling entrenched inflation concerns.

Technical outlook for GBP/USD – where is the currency pair headed?

From a technical perspective, GBP/USD is under pressure and heading towards the 200-day simple moving average located at 1.3384. Breaking below this key support could open the way to the 50-day SMA at 1.3288, and in a scenario of sustained selling pressure – to the 1.3200 level.

Conversely, for buyers to take control, a rebound above 1.3450 would be necessary – this resistance level previously halted the rally. If such a rebound succeeds and gains strength, the next target would be the 1.3500 level. In the coming days, investors will closely monitor the situation in the sterling and dollar markets, awaiting further macroeconomic data from both economies.