GBP/USD dipped after the US jobs data on Friday and tested support below the 1.2400 level before settling just above this level on Monday.  The US employment report recorded an increase in non-farm payrolls of 236,000 for March and close to market expectations while the February increase was revised higher to 326,000 from the original reading of 311,000.  There was another strong increase in the number of government jobs of close to 50,000 and the increase in private payrolls was below expectations.  Market analysts are once again focused on a potential recession in the United States, following aggressive monetary tightening from the Federal Reserve (Fed) and the banking crisis that started last month.

The EUR’s drift last week extended a bit more than I expected but support has developed around the upper 1.08 zone, with investors buying into improved Eurozone growth prospects and the notion that the hawkish-sounding ECB is likely to raise rates a bit more still and—perhaps more importantly—keep policy relatively tight in the months ahead.

GBP has seen a steady improvement in the past few weeks, recovery from last year’s politically driven weakness has been quite impressive and further upside gains are looking possible. Modestly tighter BoE policy remains a strong possibility in May but is only partially factored in at this point.  GBP may find firmer directional strength on Thursday when the UK will release updates on the Gross Domestic Product, Industrial and Manufacturing Production, and the Trade Balance.