US Job Loss Derails Fed, Launching Pound Toward $1.35

The British Pound brushed against the key 1.3500 level against a weakened U.S. Dollar, but the charge has stalled. The currency pair GBP/USD traded around 1.3495 early Monday, a gain of just 0.04%, as it struggled to hold firmly above that psychological barrier according to FXStreet.

This hesitation follows a Friday surge powered by a shockwave from U.S. employment data that has left the Greenback wobbly and reshaped Federal Reserve interest-rate expectations in a single session.

The NFP Shock Rewrites the Fed's Script

Friday’s U.S. Nonfarm Payrolls report delivered a stunning reversal: the economy lost 23,000 jobs in July. This unexpected contraction has fueled immediate concerns about a labor market slowdown and, critically, forced markets to dramatically dial back bets on more Federal Reserve rate hikes.

Markets now see less than a 45% chance of a Fed interest-rate hike in September, down from around 67% a week earlier.

This shift is the anchor dragging on the Dollar. With the prospect of near-term monetary tightening fading, the currency’s primary yield advantage narrative has taken a direct hit. The Dollar's attempted stabilization Monday, supported by Middle East tensions, has so far been insufficient to stage a meaningful recovery, allowing rival currencies like the Pound to press their advantage near multi-week highs, a pattern also seen as the Swiss Franc outmuscles the Dollar. This follows a period where the Pound was gripped below 1.3450 ahead of the same U.S. jobs report shock.

Sterling's Fate Rests With UK GDP and Persistent Dollar Weakness

For the Pound to finally establish a sustained breakout above 1.3500, it needs a catalyst. The immediate one will arrive Thursday with the UK’s preliminary Q2 GDP estimate.

• The Consensus Expectation: The UK economy is forecast to have expanded by 0.4% in the second quarter, a slowdown from 0.6% growth in Q1.
• The Bank of England's Stance: Officials are even more cautious, projecting a softer 0.3% q/q print as tighter financial conditions bite.

Analysts at Brown Brothers Harriman warn that this data is pivotal for Sterling. The swaps market is still pricing in 50 basis points of further BoE tightening, which would push the policy rate to 4.25%. BBH stresses this rate would sit above the BoE’s estimated neutral range while the economy operates below potential, making those hawkish bets look "vulnerable to a dovish repricing" against the Pound without a strong GDP beat.

In essence, the Pound faces a binary short-term test: robust UK growth could provide the local fuel for a breakout, while a miss could see it retreat. The Dollar’s own trajectory, heavily dependent on upcoming U.S. inflation data, will act as the overarching tide lifting or sinking all major currency boats.

Technical Battle Lines Are Drawn at 1.3500

On the charts, the pair’s struggle is clear. The immediate horizontal resistance sits near 1.3509. A confirmed break above this level could open a path toward the next significant cap around 1.3558, July’s swing high.

The Bullish Case: GBP/USD holds a mild positive bias, trading above both its 100-period SMA (1.3461) and 200-period SMA (1.3432), with an upward support trendline near 1.3440. The Relative Strength Index hovering just above 60 suggests firm but not exhausted upside momentum.

The Bearish Risk: Failure to hold above 1.3500 invites a pullback. The first key support is the 100-period SMA at 1.3461, followed by the confluence of the trendline and the 200-period SMA around 1.3432-40. A break below this zone would critically weaken the current constructive setup.

For now, the Pound is in a holding pattern, buoyed by a wounded Dollar but lacking its own decisive catalyst. The currency’s attempt to reclaim a level not seen in weeks hinges on a cold reading of UK economic output this Thursday.

Disclaimer: This XOOMAR analysis is for informational and educational purposes only. It is not financial, investment, legal, tax, or professional advice. It does not provide buy, sell, hold, price-target, portfolio, or personalized recommendations. Verify information independently and consult qualified professionals before making decisions.

Why This Changes Everything

• The sudden drop in U.S. jobs to a loss of 23,000 has dramatically shifted Fed rate hike expectations, altering global capital flows and currency valuations.
• A sustained Pound break above 1.3500 could signal prolonged Dollar weakness, impacting international trade costs, corporate earnings, and inflation pressures.
• The upcoming UK GDP data will determine if Sterling's strength is supported by domestic fundamentals or is solely reliant on a weakening U.S. Dollar.