The Pound Sterling continues to gain momentum against the US Dollar, rising to approximately 1.3580 amid signs of a weakening US labor market. This ascent marks the third consecutive day of gains for the GBP/USD pair, which has now reached its highest point in three weeks during the European trading session. The decline in the US Dollar is attributed to deteriorating job demand, prompting investors to closely monitor the upcoming Nonfarm Payrolls (NFP) benchmark revision report set for release at 14:00 GMT.
Current market indicators reveal a downturn for the Greenback, as the US Dollar Index (DXY) has slid to a fresh six-week low around 97.30. Market participants are particularly attentive to the forthcoming NFP report, which is expected to revise cumulative monthly figures for the year ending March 2025, with final revisions slated for the 2026 Employment Situation release. Such data will likely have implications for the Federal Reserve’s monetary policy strategies. The Fed had previously implemented a 50-basis-point interest rate cut during its September meeting, following a report indicating a downward adjustment of payroll figures by 818,000.
On the interest rate front, speculation about a potential reduction has escalated, especially in light of the recent job market challenges. According to the CME FedWatch tool, there is an 11.6% likelihood that the Fed will opt for a 50-basis-point cut to bring rates down to the 3.75%-4.00% range, while a more standard 25-basis-point reduction remains the anticipated outcome.
In addition to the NFP report, investors will also focus on upcoming releases of the Producer Price Index (PPI) and Consumer Price Index (CPI) data for August, set to be published midweek. These figures will provide further insight into inflationary trends and economic stability.
In the UK, attention turns to the scheduled speech by Bank of England (BoE) Deputy Governor Sarah Breeden at 15:15 GMT. Analysts expect that her remarks on monetary policy will influence trading patterns, especially as the BoE is projected to maintain interest rates at 4% in its upcoming meeting. Breeden was previously among the Monetary Policy Committee members who voted for a 25-basis-point cut in rates last month.
This week’s economic data releases will also include the UK’s monthly Gross Domestic Product (GDP) and factory figures for July, both anticipated to be announced on Friday. Economists predict that the economy demonstrated moderate growth of 0.1%.
From a technical standpoint, the GBP/USD’s upward shift to near 1.3580 signifies a strengthening bullish trend, navigating through a range established over the last month between 1.3333 and 1.3595. The 20-day Exponential Moving Average (EMA) currently stands around 1.3487, reinforcing the bullish sentiment. Meanwhile, the 14-day Relative Strength Index (RSI) suggests a sideways trend within the 40.00-60.00 range. Should the GBP/USD encounter downward pressure, the low from August of 1.3140 serves as a key support level, while resistance is likely to be encountered around the July 1 high of 1.3800.
