Pound Holds Above 1.35 Ahead of BoE Signals, US Jobs Data

Key Moments

Spotlight on GBP/USD Ahead of US Labor Data

The British Pound is edging higher against the US Dollar in early Asian trading on Friday, with GBP/USD hovering around 1.3530. The move comes as markets respond to comments from a Bank of England (BoE) policymaker that were interpreted as supportive of tighter monetary policy. Attention now turns to the release of the US August employment report later in the day, which could influence expectations for US interest rates and, by extension, the dollar side of the pair.

BoE’s Pill Argues for Earlier Rate Action

BoE Chief Economist Huw Pill stated on Thursday that raising interest rates now would help reduce the probability that the central bank would later need to adopt a more forceful approach to control inflation, which has increased as a result of the Iran war.

“Raising Bank Rate … need not be the start of a prolonged and aggressive series of increases,” said Pill.

Interest rate futures on Thursday reflected only a modest chance of near-term tightening. Traders assigned a little more than a 15% probability to a 25 basis points increase at the BoE’s meeting this month, while pricing in more than a 70% likelihood of such a move at the following meeting in November.

US August Jobs Report in Focus

The upcoming US August employment report is set to be a key driver for markets later in the session, with the data expected to shape views on the US interest rate path. Consensus projections point to a 56,000 increase in Nonfarm Payrolls (NFP) for August. The Unemployment Rate is anticipated to remain unchanged at 4.1% over the same period.

“Monthly payrolls readings have been softer in recent months, but low jobless claims and a steady unemployment rate have kept Fed officials unconcerned about the labor market,” said Citigroup economist Andrew Hollenhorst.

BoE November Meeting and Yield Spreads Underpin GBP

Strategists at Scotiabank note that market focus is increasingly shifting to the BoE’s early November meeting. They emphasize that “the November 5th meeting is priced for 18bpts and is also an Inflation Report/forecast meeting and thus should provide for a more fulsome analysis as it will also follow the government’s Autumn Statement/budget scheduled for October 28th.”

They further point out that “UK-US yield spreads remain supportive following this week’s surge,” which they see as reinforcing the supportive environment for the Pound even though near-term policy expectations have only been modestly adjusted.

Pill’s Speech Signals Hawkish Tilt

Pill’s most recent remarks registered a score of 8.2 on the FXS Speechtracker, slightly above the historical average of 7.9, indicating a somewhat stronger-than-usual policy signal. His explicit reference to raising Bank Rate to 4% and his emphasis on timely, decisive measures to limit second-round inflation effects convey a clearly hawkish stance, despite his indication that this would not necessarily imply a long or aggressive tightening campaign.

By stressing that attempting to ‘fine-tune’ interest rates amid uncertainty around energy prices is difficult, and suggesting that second-round effects could now be more pronounced than during the “halcyon days” of inflation targeting, Pill underscores a preference for front-loaded policy moves. For GBP, the combination of a specific rate level, advocacy for earlier action, and caution against extreme hypothetical scenarios helps bolster expectations of a near-term hike, while also capping speculation on a prolonged series of increases.

GBP/USD Technical Picture

On the daily chart, GBP/USD maintains a mildly bullish setup, with the pair trading above the 100-day Simple Moving Average (SMA) and above the lower Bollinger Band. This configuration preserves the existing uptrend structure despite a modest pullback from recent peaks. The Relative Strength Index (RSI) is near 52, implying a slightly positive bias, with upward pressure consolidating rather than reversing. However, the pair is currently pausing just below the middle Bollinger Band, suggesting possible near-term range trading.

Key technical levels are summarized below:

On the upside, a break above the middle Bollinger Band around 1.3555 would open the way to the upper band near 1.3660 if buying interest strengthens. On the downside, first support is located near the lower Bollinger Band at 1.3450, followed closely by the 100-day SMA at 1.3445. A move below this latter level would point to a deeper correction and would undermine the current constructive bias.