GBP/USD trades with modest losses around 1.3600, NFP in focus

• GBP/USD witnessed some selling on Friday amid a modest USD strength.
• Hawkish Fed expectations, rallying US bond yields underpinned the USD.
• The downside remains limited ahead of the US monthly jobs data (NFP).

The GBP/USD pair remained on the defensive through the first half of the European session, albeit has recovered few pips from daily lows and was last seen trading just above the 1.3600 mark.

The pair struggled to capitalize on the previous day's positive move, instead met with some fresh supply on Friday and was pressured by sustained US dollar buying interest. Following a brief pause on Thursday, the USD was back in demand amid rallying US bond yields and prospects for an early policy tightening by the Fed.

The US bond yields have been scaling higher since late September when the Fed signalled that it would begin tapering its bond purchases by the end of 2021. Moreover, investors have been betting on the possibility of an interest rate hike in 2022 amid worries that the recent surge in oil/energy prices will stoke inflation.

That said, the prevalent risk-on mood – as depicted by a generally positive tone around the equity markets – kept a lid on any further gains for the safe-haven greenback. Apart from this, signs of easing fuel crisis in the United Kingdom acted as a tailwind for the British pound and helped limit losses for the GBP/USD pair.

Investors also seemed reluctant to place aggressive bets, rather preferred to wait on the sidelines ahead of Friday's release of the closely-watched US monthly employment figures. The popularly known NFP report will influence the Fed's next policy move and drive the USD in the near term, providing a fresh directional impetus to the GBP/USD pair.

Technical levels to watch