Summary:
BoE rate cut expectations and stronger US dollar push GBP/USD lower as traders await key US non-farm payroll data for further direction.
The GBP/USD currency pair continued to face downward pressure during Friday's Asian session, trading near 1.3195 — close to this week's lows. Market sentiment is largely shaped by expectations that the Bank of England (BoE) will once again cut its benchmark interest rate at the upcoming monetary policy meeting on 7 August, reducing it from 4.25% to 4.0%. This follows a 25 basis point cut at the May meeting, signalling a persistent dovish stance that continues to weigh heavily on sterling demand.
Market surveys reveal that the probability priced into the currency markets for a rate cut in August has soared to 89%. This reflects investors' growing concerns over the UK economy's cooling momentum, falling inflationary pressures, and signs of weakening in the labour market.
"The UK economy is currently under dual pressures: sluggish growth in the services sector combined with slowing wage growth has forced the Bank of England towards a more accommodative monetary policy stance," noted one rates strategist.
On the other hand, the US dollar has found support from fresh policy developments. President Trump's executive order setting a global minimum tariff rate of 10%, hiking tariffs on Canadian imports from 25% to 35%, and extending Mexican tariff arrangements by 90 days to allow for further negotiations, has bolstered dollar safe-haven demand. This has contributed to a firmer US dollar index, further challenging GBP/USD.
The spotlight now shifts to the imminent release of the US July Non-Farm Payroll (NFP) data. Forecasts suggest that US job additions may slow to around 110.000. while the unemployment rate could rise slightly to 4.2%. Should the data disappoint relative to expectations, the US dollar might see a short-term pullback, potentially offering GBP/USD a modest recovery window.
From a technical perspective, the GBP/USD has already breached short-term support at 1.3220 on the daily chart and is currently testing the 1.3180–1.3190 zone. A further drop below this level could expose the key support at 1.3140 and the 50-day moving average near 1.3085.
Resistance remains capped around 1.3250 to 1.3300. limiting any near-term rebound potential without a favourable US data surprise.
Technical Indicators: Bearish Bias Holds
RSI hovers around 45 — no clear oversold signal yet.
Momentum indicators are trending downward, suggesting further downside.
MACD maintains a bearish crossover, reinforcing the short-term negative outlook.
The current pressure on sterling largely stems from the forward-looking expectations of monetary policy rather than immediate economic fundamentals. Contrastingly, the Federal Reserve has delayed easing measures due to robust US economic data, creating a divergence in policy outlooks between the two economies.
Moreover, while US trade policies have stoked global uncertainties, in the near term they have paradoxically enhanced dollar safe-haven flows and capital repatriation. Should tonight's NFP data impress, the GBP/USD could face further downside. Conversely, weaker US employment figures may trigger a technical rebound; however, the medium-term outlook for the pair will remain closely tied to the evolving trajectory of UK monetary policy and inflation dynamics.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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