**GBP/USD Hovers Near Weekly Lows Below Mid-1.3400s as Markets Brace for Key US NFP Report**
*By Haresh Menghani, originally published on FXStreet*
The GBP/USD pair remains trapped near its lowest levels of the week, trading below the mid-1.3400s, as uncertainty looms ahead of the much-anticipated US Nonfarm Payrolls (NFP) data scheduled for release later today. The pair’s lackluster performance reflects a market caught in limbo, weighed down by familiar headwinds and hesitating to commit to a new direction amid macroeconomic and monetary policy crosscurrents.
**Market Cautious Near Crucial Support**
As London opened on the final trading day of the week, sterling attempted modest gains against the greenback but quickly lost momentum. GBP/USD traded in a tight band, gathering little support as traders refrained from placing aggressive bets prior to the release of the latest US payrolls print—a potentially market-moving event.
The pair had hit a one-week low earlier, briefly dipping below 1.3430 during Asia-Pacific hours before stabilizing. A combination of fundamental pressures and cautious sentiment is shaping ongoing trade:
– The Bank of England’s dovish tone and cautious stance on further rate increases continue to weigh on pound prospects.
– The US dollar retains a strong bid, supported by rising US Treasury yields and general optimism regarding the US economic outlook.
– Lingering Brexit-related uncertainties, particularly concerning the Northern Ireland protocol and trade relationship tensions with the EU, have also tempered enthusiasm for sterling.
– Renewed worries about the global growth outlook and possible monetary tightening from major central banks are limiting risk appetite, helping the dollar attract safe-haven flows.
**Investors Await US NFP Data For Direction**
The top focus for FX and global markets as the week ends is the US Labor Department’s Nonfarm Payrolls report. The NFP is closely watched for signals about the health of the world’s largest economy and as a possible harbinger of the pace at which the Federal Reserve will tighten policy.
Market consensus points to the addition of some 200,000 jobs in December—a slowdown from previous readings but still more than enough to keep fears of an abrupt economic softening at bay. At the same time, investors will be scrutinizing figures on hourly wages and the unemployment rate for evidence of lingering wage pressures and broader employment trends.
– Strong payrolls data would likely reinforce expectations that the Federal Reserve will maintain a hawkish tilt, keeping the dollar well-supported and potentially putting the pound under further pressure.
– A downside surprise in the NFP could give GBP/USD a near-term lift, though the broader trend may hinge on whether such a result meaningfully alters Fed policy expectations.
**Dollar Benefits From Firm Yields and Fed Tightening Bets**
This week has seen the US dollar index maintain upward momentum, holding near its strongest levels in over six months as traders bet that the Fed would need to keep rates elevated for longer to curb inflation. US Treasury yields have also remained supported, providing further tailwinds for the greenback against its major peers.
The minutes from the December FOMC meeting reinforced the Federal Reserve’s determination to bring inflation down, even at the expense of some economic slack. Policymakers did not seem in a hurry to cut interest rates and emphasized the need for clear evidence of easing price pressures.
– US macroeconomic data, including PMI surveys and jobless claims, have painted a picture of a resilient economy, countering the narrative of a sharp slowdown.
– These factors have kept upward pressure on the US dollar and weighed on higher-yielding and risk-sensitive currencies such as the British pound.
**Sterling Undermined By Cautious Bank of England Stance**
In contrast, the Bank of England (BoE) has continued to strike a comparatively dovish tone, signaling that while inflation remains a problem, policymakers are cautious about over-tightening policy and risking an economic downturn.
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