GBP/USD consolidates as ADP jobs disappoint, ISM Services PMI tops forecasts

The British Pound (GBP) is treading water against the US Dollar (USD) on Thursday, with GBP/USD struggling to build on Wednesday’s rebound from nearly a one-month. A steady Greenback, supported by mixed US economic data, is leaving buyers cautious amid renewed concerns over the United Kingdom's (UK) fiscal outlook.

At the time of writing, GBP/USD is consolidating around 1.3425, hovering near the previous day’s high. Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is holding firm near 98.30 after posting losses on Wednesday, as investors digest the latest employment and Purchasing Managers Index (PMI) releases.

The US labor releases painted a mixed picture. The ADP Employment Report showed private payrolls rose by 54,000 in August, undershooting expectations of 65,000 and sharply down from July’s revised 106,000, pointing to slower hiring momentum. Weekly Initial Jobless Claims climbed to 237,000 from 229,000, suggesting a modest rise in layoffs. However, on the brighter side, Q2 Nonfarm Productivity was revised higher to 3.3% from 2.4%, while Unit Labor Costs eased to 1.0% versus 1.6% expected, indicating cooling wage pressures.

Fresh PMI data, however, painted a stronger services outlook. The S&P Global Composite PMI slipped to 54.6 from 55.4, but the ISM Services PMI rose to 52, beating forecasts of 51 and marking an improvement from 50.1 in July. Subcomponents showed New Orders accelerating to 56, while Employment softened to 46.5 and Prices Paid held elevated at 69.2, suggesting resilient demand but a cooling labor market.

In the UK, concerns over fiscal credibility continue to cast a shadow over the Sterling. Long-dated gilt yields eased on Thursday after spiking to their highest levels since 1998 earlier this week, with the 30-year yield falling back to around 5.6% and the 10-year retreating toward 4.7%. Despite the pullback, yields remain historically elevated, reflecting investor unease about rising borrowing costs and the government’s fiscal position. Bank of England (BoE) Governor Andrew Bailey has downplayed the moves as part of a broader global bond sell-off but acknowledged uncertainty around the pace of monetary policy easing.

Looking ahead, attention turns to Friday’s US Nonfarm Payrolls (NFP) report, which will be key in determining whether markets push expectations beyond the already fully priced 25 basis point cut at the September 16-17 Fed meeting. Softer jobs numbers could open the door to speculation of a larger move, while stronger hiring would likely give the dollar fresh support. In the UK, Retail Sales and fiscal developments remain central to Sterling’s outlook.