GBP/USD Route map 1.26-1.28 post NFP

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Analyzing the GBP/USD pair, I observe that the British Pound is under pressure, trading around 1.2670 against the US Dollar during Friday's European session. This movement is primarily driven by investors' growing focus on the US Nonfarm Payrolls data. While the UK manufacturing sector continues to face pressures, it's noteworthy that the services sector exceeded expectations in December, according to PMI data. Meanwhile, the US Dollar Index (DXY) is recovering swiftly, bolstered by positive data from the US. This rebound further pressures the Pound, which is already struggling to find solid ground. Investors are concerned as the Bank of England (BoE) policymakers face tough decisions, balancing the risks of a deep recession in the UK economy and high underlying inflation. The likelihood of a technical recession in the UK is high, with the economy contracting in the third quarter and anticipated to show stagnant performance in the final quarter. Moreover, recent PMI data indicates that the manufacturing sector continues to suffer due to high-interest rates. The future of the GBP/USD pair will be influenced by the US Nonfarm Payrolls data for December. Should this data indicate further cooling of the US job market, the outlook for the pair might improve. The expectation for job additions in December is moderate, with forecasted slower growth in average hourly earnings, which could signal a deceleration in US inflation. Investors are also increasing bets on a rate cut by the Federal Reserve in March if labor market conditions soften more than expected. However, a premature rate cut decision by the BoE to avoid a recession could fuel further inflationary pressures in the UK. On the chart, I've highlighted a possible price direction post-NFP; the price could take liquidity below 1.26 before moving towards 1.28. Best wishes and good trading to all.