The GBP/USD pair trades sideways above the 1.3450 level during early European trading on Thursday, as market participants adopt a cautious stance ahead of crucial US economic releases. With volatility subdued, traders remain focused on upcoming labor market data that could shape near-term expectations for US monetary policy.
Later in the session, attention will turn to the Weekly US Initial Jobless Claims report, while the spotlight remains firmly on Friday’s highly anticipated Nonfarm Payrolls release.
US jobs data in focus ahead of NFP release
The December US employment report is expected to play a pivotal role in guiding interest rate expectations. Markets are forecasting an increase of 60,000 jobs in December, while the Unemployment Rate is seen edging lower to 4.5% from 4.6% previously.
Stronger-than-expected results could challenge expectations for further easing by the Federal Reserve, potentially lending support to the US Dollar and weighing on the Pound. Conversely, any signs of labor market softening would likely reinforce bets on rate cuts, keeping the Greenback under pressure.
Dovish Fed rhetoric caps dollar upside
Recent comments from Federal Reserve officials continue to signal a dovish tilt, limiting the USD’s upside potential. Fed Governor Stephen Miran noted earlier this week that aggressive interest rate cuts may be necessary this year to sustain economic momentum. Adding to the cautious outlook, Minneapolis Fed President Neel Kashkari warned that the unemployment rate could rise more sharply than anticipated.
This dovish messaging has helped keep the US Dollar on the defensive, providing some underlying support for GBP/USD despite the broader risk-off tone.
BoE policy outlook lends support to sterling
On the UK side, expectations that the Bank of England will pursue a gradual easing cycle continue to offer support to the Pound. With inflation still well above the BoE’s 2% target, policymakers are expected to proceed cautiously.
According to market pricing cited by Reuters, investors anticipate at least one BoE rate cut in the first half of the year, with nearly a 50% probability of a second reduction before year-end. This measured policy outlook could help limit downside pressure on Sterling, keeping GBP/USD anchored above key support levels in the near term.
Ready to start trading Forex? Join iXBroker today and kick-start your trading journey now!
