GBP/USD extends upside near 1.2800 ahead of US NFP data

• GBP/USD holds positive ground near 1.2795 in Friday’s early Asian session. 
• Higher Fed rate cut bets weigh on the US Dollar and US bond yields. 
• Investors expect the BoE to deliver two rate cuts this year. 

The GBP/USD pair trades in positive territory for the third consecutive day around 1.2795 during the early Asian session on Friday. In the absence of key UK economic data releases, the GBP/USD pair will be influenced by the USD. All eyes will be on the US Nonfarm Payrolls (NFP) data for May, which is due later on Friday. 

Traders raised their bets that the US Federal Reserve (Fed) would cut interest rates later this year, dragging the US Dollar (USD) and bond yields lower. Meanwhile, the US Dollar Index (DXY), a measure of the value of the USD relative to a basket of foreign currencies, drops to 104.10, while the US 10-year benchmark edges lower to 4.285%. Markets have priced in about 68% odds of a Fed rate cut in September, up from 55% at the beginning of the week, according to the CME FedWatch tool.

On Thursday,  the US Department of Labor reported that the US weekly Initial Jobless Claims for the week ending May 31 rose by 229,000 from the previous reading of 221,000, above the market consensus of 220,000. Investors will take more cues from the US May employment data. 

The NFP figure is projected to see 185,000 job additions in the US economy in May, while the Unemployment Rate is forecast to remain steady at 3.9% in the same report period. Softer-than-expected employment data might trigger speculation of a Fed rate cut, which further exerts some selling pressure on the Greenback. 

On the other hand, the UK Employment data and the monthly Gross Domestic Product (GDP) data for April will be released. These reports might offer some hints about rate cut expectations from the Bank of England (BoE). The markets expect that the UK central bank will deliver two rate cuts this year and will begin easing policy from the August meeting.