GBP/USD surges as weak US data fuels Fed rate-cut bets

• US ADP Employment misses expectations, adding just 77K jobs in February.
• ISM Services PMI improves to 53.5, but rising prices fuel inflation concerns.
• BoE officials signal caution on rate cuts, keeping GBP supported.

The Pound Sterling extended its gains versus the US Dollar on Wednesday, as market participants punished the latter. Market participants priced in additional monetary policy easing by the Federal Reserve. US data shows the economy is weakening, with businesses and consumers turning pessimistic, mostly on trade policies. The GBP/USD trades at 1.2864, up over 0.55%.

Sterling jumps 0.55% to 1.2864 as traders punish the US Dollar

The US jobs market continues to slow down, as depicted by the ADP Employment Change for February. Companies added 77K people to the workforce, missing estimates of 140K and well below the 188K hired in January.

In the meantime, the ISM Services PMI in February rose by 53.5, up from 52.8, exceeding forecasts of 52.6, an indication of business expansion. The Prices Paid sub-component rose sharply from 60.4 in January to 62.6, with New Orders and the Employment Index following suit.

GBP/USD traders have ignored the recent US data so far. Nevertheless, interest rate traders had priced in 74.5 basis points of Fed easing in 2025, down from the 81 bps expected a day ago.

Meanwhile, some Bank of England (BoE) members are crossing wires. Megan Greene commented that inflation is unlikely to persist and that it would fade at its own pace, though she added that policy needs to remain restrictive. BoE MPC member Alan Taylor said every meeting would be live for rate moves.

In the meantime, BoE Governor Bailey said they expect a pick-up in inflation. BoE Chief Economist Huw Pill added they need to remain vigilant and that evidence points against more rapid cuts in the Bank Rate.

The GBP/USD retreated somewhat on the headlines but remains within the 1.2850 - 1.2870 range.

GBP/USD Price Forecast: Technical outlook

The GBP/USD shifted from neutral to upward biased after clearing the 200-day Simple Moving Average (SMA) at 1.2786. A daily close would cement the uptrend and pave the way to challenge the 1.3000 mark. Otherwise, failure to close above the 200-day SMA will clear the way to test the 1.2700 figure.