GBP/USD inched higher toward 1.3060 during early European trading on Thursday, breaking a four-day losing streak. However, market sentiment may turn cautious as traders await the long-delayed US September Nonfarm Payrolls (NFP) report due later in the day.
BoE Rate-Cut Expectations Weigh on the Pound
Data from the UK’s Office for National Statistics showed that CPI inflation slowed to 3.6% YoY in October, down from 3.8% in September—matching forecasts. The decline in inflation has strengthened expectations of a Bank of England (BoE) rate cut at the December meeting, a factor that may cap GBP/USD’s upside in the near term.
Additionally, attention is shifting toward the UK government’s November 26 budget, which could influence the central bank’s policy path.
US NFP Release Takes Center Stage
The September US jobs report—delayed by a 43-day government shutdown—will be a key driver for the pair. The disruption has complicated the Federal Reserve’s evaluation of the labor market.
Economists anticipate the NFP report will show around 50,000 new jobs added in September. Average Hourly Earnings are projected to rise 0.3% MoM, and the Unemployment Rate is expected to remain steady at 4.3%. A softer-than-expected report could weaken the US Dollar, boosting GBP/USD.
On Wednesday, the FOMC Minutes revealed “strongly differing views” among policymakers ahead of the December meeting. While most still support further rate cuts, several officials argued that keeping rates unchanged for the remainder of the year may be appropriate.
Pound Sterling – Key Background
- GBP is the world’s oldest currency and the UK’s official legal tender.
- It is the fourth most traded currency globally, notable in pairs such as GBP/USD (Cable), GBP/JPY (Dragon), and EUR/GBP.
- The BoE shapes GBP’s value primarily through interest rate decisions aimed at maintaining 2% inflation.
- Strong UK economic data typically supports the Pound by encouraging tighter monetary policy, while weak data tends to pressure it lower.
- The Trade Balance also influences GBP: a surplus strengthens the currency, while a deficit has the opposite effect.
