GBP/USD Traders Prepare for the Non-Farm Payroll, the Straw That Will Break the Camel's Back

The pound is steady against the US dollar at 1.2365 but remains in extremely negative territory after collapsing below critical daily support on Thursday. GBP/USD plummeted from a high of 1.2634 to a low of 1.2325 as a result of the Bank of England's stern warnings, weak global economic statistics, and the likelihood of an aggressive Federal Reserve.

The Bank of England increased rates by 25 basis points, but "surprisingly, the BoE now forecasts inflation at 10.25 percent year on year in Q4 this year, up from 5.75 percent previously, due to higher power costs," analysts at ANZ Bank stated.

"In a particularly evocative illustration of a recurring global phenomenon, inflation is creating a "real income shock" - with average earnings growth falling short of inflation, real personal consumption would ultimately decline dramatically."

"In reality, the Bank of England forecasts that all components of domestic demand will slow this year and into next."

Against a backdrop of deteriorating Chinese PMIs and Germany's factory orders falling a massive 4.7 percent in March, compared to the -1.1 percent forecast, the US dollar thrived in anticipation of inflows to the US economy, which has performed better than other developed economies.

With an eye on the NFP

Thus, the Nonfarm Payrolls report becomes a crucial event. For example, ANZ Bank noted that "although the Fed is not considering a 75 basis point rate hike at the moment, that guidance is predicated on forecasts that the trend growth in monthly nonfarm payrolls will moderate and core inflation will stabilize."

However, there are no promises that will be the case. The demand for labor in the United States remains quite robust, and inflation in core services continues to rise gradually. Thus, tomorrow night's nonfarm payroll and employment figures are critical."

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