The GBP/USD pair extended its modest positive streak for a third consecutive day during Thursday’s Asian session, holding steady above the 1.2700 level. Despite this upward bias, spot prices remain below the weekly high recorded on Monday, reflecting a lack of strong bullish momentum.
USD Steadies Amid Pre-NFP Caution
The US Dollar (USD) traded in a narrow range as market participants adopted a cautious approach ahead of Friday’s Nonfarm Payrolls (NFP) report, a crucial data release for assessing the US labor market and its implications for Federal Reserve policy. This indecision among traders offered some support to the GBP/USD pair. However, expectations of a less dovish Federal Reserve—highlighted by a modest recovery in US Treasury yields—provided underlying strength to the Greenback.
Fed Signals Caution Amid Inflationary Outlook
Investors are increasingly convinced that US President-elect Donald Trump’s tariff strategies and expansionary economic policies could spur inflation. Reinforcing this sentiment, Federal Reserve Chair Jerome Powell, along with other key Federal Open Market Committee (FOMC) members, signaled a cautious stance on further interest rate cuts. This fueled a rebound in US Treasury bond yields, further bolstering the USD.
Geopolitical concerns, including the ongoing Russia-Ukraine conflict and fears of a trade war, also drove demand for the USD as a safe-haven asset, adding another layer of pressure on the GBP/USD pair.
GBP Faces Challenges Amid BoE’s Rate Expectations
The British Pound (GBP) struggled to find strong buying interest, as sentiment was tempered by the Bank of England (BoE) Governor Andrew Bailey’s projection of four interest rate cuts in 2025. This dovish outlook for UK monetary policy curbed enthusiasm among GBP bulls, keeping the GBP/USD pair range-bound.
Key Data in Focus
Investors are eyeing the upcoming UK Construction PMI data for short-term cues, followed by the US Weekly Initial Jobless Claims report, which will be released later in the day during the North American session. However, the primary focus remains on Friday’s NFP report, which will play a pivotal role in shaping market expectations for the Federal Reserve’s next policy moves.
Technical Outlook
The GBP/USD pair faces immediate resistance at the weekly high of 1.2760, with a break above potentially opening the path to 1.2800. On the downside, key support levels are located near 1.2680 and 1.2650, with a breach possibly inviting further selling pressure.
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