**GBP/USD Price Forecast: Sterling Balances at 1.35 Ahead of Fed, Jobs Data**
*By TradingNews.com staff*
The GBP/USD currency pair is treading water around the 1.35 level as the market braces for a potentially volatile week dominated by central bank commentary and key US employment data. The pound, having surged on the back of improving UK economic indicators and a broad-based US dollar pullback, finds itself at a crucial juncture. As traders weigh up persistent inflationary concerns against the backdrop of tightening US monetary policy, the near-term trajectory for sterling remains finely balanced.
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## GBP/USD at Critical Inflection Point
After a strong rally, GBP/USD faces critical resistance at 1.35, a region that has repeatedly capped gains in recent months. The pair’s resilience amid a renewed bid in US yields reflects both sterling strength and dollar weakness, although this equilibrium may prove short-lived as attention shifts to macroeconomic data and Federal Reserve communications.
Key technicals and fundamentals suggest that the next major move will be dictated by:
– The Federal Reserve’s tone on interest rate pathways
– Upcoming US non-farm payrolls report
– UK macroeconomic performance, including inflation updates
– Ongoing geopolitical tensions and their impact on risk appetite
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## The Dollar Weakens, Sterling Recovers
The US dollar index (DXY) has given up some of its recent gains, aided by a moderation in Fed officials’ rhetoric and a cooling of inflation expectations. In contrast, the pound has been buoyed by a string of positive economic releases from the UK and firming expectations that the Bank of England (BoE) will stick to its tightening schedule.
**Key drivers of recent GBP/USD price action:**
– **US economic slowdown:** Data hint at softer momentum in US growth, prompting bets that the Fed may slow its hiking cycle.
– **Expectations of BoE action:** Markets anticipate that the Bank of England will continue hiking rates to combat embedded British inflation.
– **Brexit-related risk recedes:** With the major political hurdles of Brexit in the rearview mirror, sterling faces fewer outsized political risks.
– **Sentiment shifts:** Broad risk-on sentiment in global markets favors higher-yielding and riskier currencies like the pound over the safe-haven dollar.
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## Market Braces for Fed Policy Signals
All eyes are on the upcoming Federal Reserve meeting and speeches from key central bank officials. Investors are watching for confirmation that the Fed could be reaching the peak of its policy tightening cycle, which could catalyze further US dollar weakness.
### Potential Scenarios Depending on Fed Messaging:
– **Hawkish Fed:** A reaffirmation of aggressive rate hikes, or more hawkish rhetoric from Fed Chair Jerome Powell, would likely push the dollar higher and weigh on GBP/USD.
– **Dovish pivot:** Any signal that the Fed is considering a pause or slowing its hiking schedule could send the dollar lower and give GBP/USD bulls room to test higher levels.
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## Friday’s US Jobs Data Looms Large
Investors are closely watching the US non-farm payrolls report for fresh indications of labor market strength. The jobs data will provide crucial clues as to whether the US economy can withstand higher borrowing costs, and may significantly influence the Fed’s next policy moves.
**Key points to watch in the jobs report:**
– **Headline jobs gains:** Strong job creation would reinforce the case for higher US rates, supporting the dollar.
– **Wage inflation:** Persistent wage growth could stoke inflation fears, keeping the Fed on its tightening path.
– **Participation rate:** An improvement here could indicate a healthier labor market, although softening might trigger policy recalibration.
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## UK Economic Outlook and Central Bank Pathways
The pound has outperformed many of its major peers in recent sessions as UK data surprised to the upside. Resilient consumer spending and an uptick in purchasing managers’ indices (PMIs) have allayed fears
Read more on GBP/USD trading.