British Pound eases below 1.3450 as markets brace for the US Nonfarm Payrolls report

GBP/USD drifts below 1.3450 but remains trapped within the weekly range.
FX volatility remains low as investors await the US Nonfarm Payrolls report.
The Dollar drew some support on Thursday from a Financial Times report hinting at Fed rate hikes in September.

Guillermo Alcala FXStreet

The British Pound (GBP) nurses minor gains against the (USD) for the second consecutive day on Friday, with the GBP/USD retreating to levels just below 1.3450 at the time of writing. The pair, however, remains trapped within the 1.3400-1.3500 range that has been limiting price action since the beginning of August.

The US Dollar ticked up on Thursday, fuelled by a report from Financial Times, citing sources close to the US Federal Reserve (Fed), to affirm that Chairman Kevin Warsh would be open to hiking interest rates in September if upcoming inflation data shows that price pressures remain persistently high.

Investors, however, remain wary of placing larger directional bets on the US Dollar, ahead of the release of July’s Nonfarm Payrolls (NFP) report, which is due later on the day. The market is expecting an increase to 80K new payrolls from June’s 57K, with the Unemployment Rate unchanged at 4.2% and wages growing at a steady pace of 0.3% month-over-month and 3.5% from July 2025.

Strategists at UOB Group note that the recent GBP/USD advance has lost conviction: “While strong momentum suggests further upside, it remains to be seen whether GBP can break and hold above the significant resistance at 1.3555.” In that sense, the bank argues that “from here, a breach of 1.3410 (no change in ‘strong support’ level) would mean that 1.3555 is not coming into view.”

Economic Indicator

Nonfarm Payrolls

The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months' reviews and the Unemployment Rate are as relevant as the headline figure. The market's reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.

Why it matters to traders?

America’s monthly jobs report is considered the most important economic indicator for forex traders. Released on the first Friday following the reported month, the change in the number of positions is closely correlated with the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, thus impacting currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tend to surprise markets and trigger substantial volatility. Actual figures beating the consensus tend to be USD bullish.

Economic Indicator

Unemployment Rate

The Unemployment Rate, released by the US Bureau of Labor Statistics (BLS), is the percentage of the total civilian labor force that is not in paid employment but is actively seeking employment. The rate is usually higher in recessionary economies compared to economies that are growing. Generally, a decrease in the Unemployment Rate is seen as bullish for the US Dollar (USD), while an increase is seen as bearish. That said, the number by itself usually can't determine the direction of the next market move, as this will also depend on the headline Nonfarm Payroll reading, and the other data in the BLS report.

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