The Pound (GBP) surrendered all its intraday gains against the US Dollar (USD) and fell back near 1.2400 in the North American session on Friday (7/2) after the release of the US (US) Nonfarm Payrolls (NFP) data for January. The US NFP report showed that the economy added 143K workers in January, much lower than the 170K estimate and the previous reading of 307K, revised up from 256K. The Unemployment Rate slowed to 4% from the estimate and the previous reading of 4.1%.

The Average Hourly Earnings data, a key measure of wage growth that drives consumer spending, surprisingly came in higher than expected. The wage growth measure rose at a faster pace of 4.1% year-on-year, compared to 3.9% growth in December. Economists had expected the Average Hourly Earnings data to have slowed to 3.8%. In the month, the wage growth gauge rose at a solid pace of 0.5% against estimates and the previous reading of 0.3%.

The strong wage growth data suggests a high inflation outlook, which is likely to force Federal Reserve (Fed) officials to hold interest rates for longer. Last week, Fed Chair Jerome Powell also said that adjusting monetary policy would not be appropriate until the central bank sees "real progress in inflation or at least some weakness in the labor market".

The US Dollar Index (DXY), which tracks the greenback against a basket of six major currencies, rose near 108.00.

Meanwhile, uncertainty over US President Donald Trump's tariff agenda will also keep investors on guard. Market participants expect President Trump to target Europe next for tariffs. (Newsmaker23)

Source: FXstreet