GBP/USD: Sterling sinks as upbeat US jobs data cools bets on Fed cuts

The British pound retreated below the $1.27 level on Friday, marking its weakest point since mid-January, as optimism over future US interest rate cuts fizzled following the release of better-than-expected jobs numbers.

The latest employment figures showed American employers ramping up hiring in January, topping economist forecasts and lowering the likelihood that the Federal Reserve will step in with policy easing in the near future. This bolstered the US dollar while weighing on sterling.

The developments come on the heels of the Bank of England’s decision Thursday to stand pat on rates, but leave the door open to possible cuts later this year in order to curb declining inflation. Market pricing currently indicates a 50% chance of a 25 basis point rate cut come May.

However, sterling bulls face headwinds, according to analysts at BNP Paribas, as surveys show a recent spike in UK consumer inflation expectations potentially tied to concerns over shipping flows. Meanwhile, BoE Chief Economist Huw Pill stated Friday that “the right time for a rate cut was still some way off.”

At the time of writing, the pound-dollar exchange rate traded at $1.2643, down 0.8% intraday.