GBP/USD reaches fresh session highs above 1.29 as DXY struggles around 99

The GBP/USD pair reached a fresh session top at 1.2905 at the opening hour of the NA session as the greenback failed to take advantage of the positive macro data from the United States. As of writing, the pair was trading at 1.29, up 0.25% on the day.

Today's macro data showed that the unit labor costs in the nonfarm business sector increased 3% in the first quarter of 2017, suggesting a strong wage growth, which could ramp up the inflation growth expectations. A rising inflation would make a June rate hike more likely. In fact, the CME Group FedWatch Tool shows that the markets are pricing a 73.8% probability. Despite that development, the US Dollar Index is struggling to gather momentum above the 99 handle as the nonfarm productivity contracted by 0.6% in the same period. At the moment, the index is at 99, losing 0.25% on the day.

• US: Productivity declines 0.6% in 1st quarter 2017 (annual rate); unit labor costs rise 3.0%
• US: Goods and services deficit was $43.7 bln in March, down $0.1 bln from $43.8 bln in February

Other data revealed that the weekly initial claims fell by 19K to 238K for the week ending April 29, signaling continuously tightening labor market conditions. Factory Orders, the only remaining data from the U.S., will be released at the top of the hour. The expectation is for the growth of orders to ease to 0.4% in March from 1% in February.

Technical outlook

1.2955/60 (Apr. 28 high/Oct. 4 high) area remains as the initial hurdle for the pair ahead of 1.30 (psychological level) and 1.3055 (Sept. 28 high). On the flip side, supports could be seen at 1.2860 (May 3 low), 1.2830 (daily low) and finally 1.2775 (20-DMA).

• GBP/USD outlook shifted to neutral – UOB