All Eyes on US NFP Data to Finish the Week.

• USD strengthens against Pound after Powell’s remarks on unlikely rate hikes and falling inflation expectations.
• GBP remains below 1.2500 against USD, needing further improvement after recent decline.
• U.S. ADP data shows increased private payrolls, except in the information sector.
• U.S. ISM manufacturing index declines, while prices index strengthens.
• Eurozone PMI surveys eyed for signs of economic momentum; attention on U.S. secondary reports and StanChart’s earnings amidst rising bond yields and fewer expected rate cuts.

USD: The Pound to Dollar exchange rate surged to 1.2550 following remarks by Federal Reserve Chair Jerome Powell, who indicated a dim likelihood of further rate hikes amidst expectations of falling inflation. Investors, anticipating a hike, had adjusted their positions, but Powell’s comments tempered these expectations, easing pressure on U.S. bond markets and the Dollar. Despite this, USD losses may be limited as the Fed signals its intent to maintain interest rates at historic highs, responding to inflationary pressures. Market expectations for rate cuts remain intact, with Goldman Sachs forecasting two cuts this year, potentially leading to a substantial repricing in U.S. interest rates and prolonged Dollar weakness.

GBP: The Pound to Dollar exchange rate held below 1.2500 ahead of the Federal Reserve meeting, while the Pound to Euro rate dipped below 1.1700. Scotiabank noted mild bullishness in intraday Pound movements, but emphasized the need for further improvement after a recent decline. U.S. ADP data showed increased private payrolls for April, with broad-based hiring, except in the information sector. Meanwhile, the U.S. ISM manufacturing index slipped, while the prices index strengthened.

EUR: Investors are eyeing Eurozone factory sector PMI surveys for signs of continued economic momentum. In the U.S., attention is on secondary reports, including job cut announcements and trade numbers. StanChart’s earnings report is anticipated against a backdrop of rising U.S. bond yields. However, expectations of fewer U.S. interest rate cuts may dampen loan growth at StanChart compared to previous forecasts.