GBP/USD sticks close to near-term highs as key labor data looms

GBP/USD remains close to recent peaks as the Greenback remains off-kilter.
US ADP jobs softened much faster than expected on Wednesday, knocking back investor sentiment.
Friday’s upcoming NFP labor print has taken on newfound importance as markets fret over tariff impacts.

Joshua Gibson FXStreet

GBP/USD caught a bid on Wednesday, paring the previous day’s losses and keeping price action on the high side of recent congestion. Bids remain pinned firmly above 1.3500 with key US Nonfarm Payrolls data looming ahead later in the week. US Dollar flows continue to dominate markets this week, with a thin offering from the UK side of the economic data docket until next week’s UK labor figures.

ADP Employment Change numbers dropped sharply in May, adding just 37K jobs, far below the expected 115K increase. Historically, ADP job figures are volatile and often poorly predict Nonfarm Payrolls (NFP) that soon follow. This Friday’s NFP release will hold added significance as investors grow concerned about the American economy’s labor sector. Increasingly wary of business conditions due to fluctuating White House trade policies, many companies are scaling back hiring and investment plans.

The ISM Services Purchasing Managers' Index (PMI) survey results further dampened investor sentiment on Wednesday, indicating that service sector operators are growing more pessimistic about growth. The aggregated results fell to a contractionary 49.9, an 11-month low.

Trade deals remain elusive, key jobs data still looms ahead

Wednesday was the deadline set by the Trump administration for trading partners to present their best trade deal offers. Countries were expected to submit offers to negotiate out of President Trump’s proposed “reciprocal” tariffs package announced in April but suspended for 90 days last minute. The administration remained relatively quiet on trade deals, implying that responses may not be as numerous as earlier suggested by Trump officials.

Thursday follows up Wednesday’s cautious prints with a relatively thin showing on the economic calendar, though a smattering of Federal Reserve (Fed) officials are expected throughout the upcoming US market session. Most of the market will be on the lookout for further trade headlines, as well as looking ahead to Friday’s NFP data dump, including net job gains and Average Hourly Earnings during May.

GBP/USD price forecast

GBP/USD found further technical support from the 1.3500 handle, helping to keep bids bolstered through Wednesday’s market session. Cable bulls are beginning to show signs of strain from keeping price action elevated, but the short side is looking equally weak as the pair runs well ahead of key long-term moving averages.

GBP/USD daily chart

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD struggles for direction amid USD gains

EUR/USD is trimming part of its earlier gains, coming under some mild downside pressure near 1.1730 as the US Dollar edges higher. Markets are still digesting the Fed’s latest rate decision, while also looking ahead to more commentary from Fed officials in the sessions ahead.

GBP/USD drops to daily lows near 1.3360

Disappointing UK data weighed on the Sterling towards the end of the week, triggering a pullback in GBP/USD to fresh daily lows near 1.3360. Looking ahead, the next key event across the Channel is the BoE meeting on December 18.

Gold losses momentum, challenges $4,300

Gold now gives away some gains and disputes the key $4,300 zone per troy ounce following earlier multi-week highs. The move is being driven by expectations that the Fed will deliver further rate cuts next year, with the yellow metal climbing despite a firmer Greenback and rising US Treasury yields across the board.

Litecoin Price Forecast: LTC struggles to extend gains, bullish bets at risk

Litecoin (LTC) price steadies above $80 at press time on Friday, following a reversal from the $87 resistance level on Wednesday. Derivatives data suggests a bullish positional buildup while the LTC futures Open Interest declines, flashing a long squeeze risk.

Big week ends with big doubts

The S&P 500 continued to push higher yesterday as the US 2-year yield wavered around the 3.50% mark following a Federal Reserve (Fed) rate cut earlier this week that was ultimately perceived as not that hawkish after all. The cut is especially boosting the non-tech pockets of the market.

Aave Price Forecast: AAVE primed for breakout as bullish signals strengthen

Aave (AAVE) price is trading above $204 at the time of writing on Friday and approaching the upper boundary of its descending parallel channel; a breakout from this structure would favor the bulls.