Softer Dollar Lifts GBP/USD Ahead of US Jobs Data Today

Key Moments

Dollar Weakness and Risk-On Mood Support Sterling

GBP/USD is trading higher around 1.3620 during the European session on Thursday, posting a gain of 0.18%. The pair is advancing as the US Dollar (USD) comes under pressure amid optimism that the United States and Iran are moving closer to a peace agreement.

Market positioning in the Dollar reflects this softer tone. The US Dollar was the weakest performer against the New Zealand Dollar in the latest daily moves among major currencies.

US Dollar Performance Snapshot

The following table summarizes the reported performance of the US Dollar Index and highlights the relative weakness of the Greenback:

The described heat map of currency moves is based on a matrix where the base currency is taken from the left column and the quote currency from the top row. For example, selecting the US Dollar as the base and the Japanese Yen as the quote shows the percentage change for USD/JPY in the corresponding cell.

Risk Sentiment and Geopolitical Developments

Risk appetite is described as positive following reports from Al-Hadath, a sister channel to Al Arabiya, that “intense communications between the US and Iran are ongoing to gradually reopen the Strait of Hormuz, a vital passage to almost 20% of global energy supply.” Equity market sentiment aligns with this tone, with S&P 500 futures trading marginally higher around 7,370, signaling improved demand for risk-sensitive assets.

Focus Turns to US Nonfarm Payrolls and Fed Outlook

Market participants are now looking ahead to the release of US Nonfarm Payrolls (NFP) for April on Friday, which is expected to be the next key catalyst for GBP/USD. The employment report is seen as an important input for shaping expectations about the Federal Reserve’s monetary policy path.

According to the CME FedWatch tool, market pricing currently indicates that the Federal Reserve is anticipated to keep interest rates unchanged at their present levels through the end of the year.

GBP/USD Technical Setup: Upside Bias Intact

From a technical perspective, GBP/USD is trading near 1.3620 and maintains a constructive bullish tone. The spot rate is holding above the 20-period exponential moving average (EMA) at 1.3518, which is acting as dynamic support.

The pair is also trading just above the 61.8% Fibonacci retracement level at 1.3600. This area has turned into immediate demand, reinforcing the short-term bullish structure. The Relative Strength Index (14) stands at 61.4, a level that indicates positive momentum without signaling overbought conditions.

On the downside, initial support is identified around the recent pivot zone near 1.3600. A more substantial support area is seen where the 20-period EMA and the 50% Fibonacci retracement converge around 1.3520. Below that, additional downside reference levels come in at 1.3434 and 1.3331.

On the topside, the first significant resistance is located near the 78.6% Fibonacci retracement around 1.3719. A sustained break above that barrier would expose the cycle high region at 1.3870 as the next resistance target.

(The technical analysis of this story was written with the help of an AI tool.)

(This story was corrected at 11:47 GMT to say in the third paragraph that S&P 500 futures are marginally higher at around 7,370, and not 7,7370.)

Pound Sterling: Background and Key Drivers

What is the Pound Sterling?

The Pound Sterling (GBP) is described as the oldest currency in the world (886 AD) and is the official currency of the United Kingdom. It is identified as the fourth most traded currency in the global foreign exchange (FX) market, representing 12% of transactions and averaging $630 billion in daily turnover, based on 2022 data.

Major GBP crosses include GBP/USD, also referred to as “Cable,” which accounts for 11% of FX trading, GBP/JPY, known among traders as the “Dragon” with a 3% share, and EUR/GBP with 2%. The Pound Sterling is issued by the Bank of England (BoE).

Bank of England Policy and Its Impact on GBP

The article notes that the most important influence on the Pound’s value is the Bank of England’s monetary policy. The BoE’s primary objective is “price stability” defined as steady inflation near 2%. Its main tool for achieving this goal is interest rate adjustment.

• When inflation is elevated, the BoE aims to cool it by raising interest rates, which makes borrowing more expensive for households and businesses. This tends to be supportive for GBP, as higher rates can make UK assets more attractive for global investors.
• When inflation is too low, it is taken as a sign that economic growth is slowing. In such situations, the BoE may consider lowering rates to reduce borrowing costs and encourage investment in growth-related activities.

Role of Economic Data in Sterling Moves

Economic releases play a key role in shaping expectations for the Pound. Data on GDP, Manufacturing and Services PMIs, and labor market conditions can all affect GBP direction.

Stronger economic figures are considered supportive for the Pound, partly because they can attract foreign capital and may prompt the BoE to raise interest rates, directly reinforcing GBP. Conversely, weaker data generally weighs on the currency.

Trade Balance and Its Influence on GBP

The Trade Balance is highlighted as another important indicator for the Pound. It measures the gap between export revenues and import expenditures over a given period.

If a country produces goods and services that are in high demand abroad, its currency can benefit from additional demand generated by foreign buyers. A positive Trade Balance therefore tends to bolster a currency, whereas a negative balance can have the opposite effect on its value.