GBP/USD took a hard hit on Wednesday after UK government issues reared their head.
US NFP jobs data will be due on Thursday this week.
American markets are closing early this week for Friday’s US holiday.
GBP/USD tumbled on Wednesday, falling back below the 1.3600 handle in a sharp plunge fueled by a sharp increase in UK bond yields. Intraday bidding action managed to shave off the worst of the lows, but Cable price action is still poised for further downside as the Pound Sterling and US Dollar race to the bottom.
UK Prime Minister Kier Starmer and his government failed to deliver on welfare cuts, a key principle of his budget proposals to bring UK government financing back under control. PM Starmer also left the possibility of tax hikes on the table, drawing the ire of markets and political critics. Further government instability is on the cards for the UK, as PM Starmer is expected to begin shuffling his cabinet in a move to consolidate and maintain his party’s control in the face of a mucky economic outlook.
US ADP Employment Change figures also missed the mark on Wednesday, contracting by 33K net job gains in a sharp reversal of market forecasts for modest growth. ADP tends to serve as a popular (albeit shaky) forecast of US Nonfarm Payrolls data. Despite a breakdown of the correlation between ADP and NFP jobs numbers, this week’s ADP report has left investor reeling as they second-guess their expectations for the US economy.
US NFP net job gains data for June is still expected to clock in around 110K net new employment positions, down slightly from May’s figures but still in positive territory. A further decline in headline jobs figures, as well as rising possibilities for steep downside revisions to older data, bodes poorly for both rate cut expectations and trader confidence that the US economy is well-sheltered from potential economic fallout from President Donald Trump’s whiplash tariff policies. Reciprocal tariffs that were announced in April are due to come back into effect next week after a last-minute 90-day extension, but the trade deals the Trump administration was hoping for remain limited at best.
GBP/USD price forecast
Cable’s Wednesday plunge pushed GBP/USD into its lowest bids in over a week, wiping out near-term gains and sending intraday price action back into rising trendlines that have pushed the pair consistently higher from multi-year lows posted in January.
GBP/USD daily chart
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