British Pound edges higher above 1.3500 ahead of US jobs report
- GBP/USD edges higher to around 1.3530 in Friday’s early Asian session.
- BoE’s Pill said higher rates would help head off inflation pressure.
- The US August jobs report is due on Friday.
The GBP/USD pair gathers strength to near 1.3530 during the early Asian trading hours on Friday. The British Pound (GBP) edges higher against the US Dollar (USD) following hawkish remarks from a Bank of England (BoE) policymaker. Traders will closely monitor the release of the US August employment report later on Friday.
Bank of England (BoE) Chief Economist Huw Pill said on Thursday that raising interest rates now would help reduce the chance that the central bank has to be more aggressive in future to tame inflation, which has picked up as a result of the Iran war.
"Raising Bank Rate ... need not be the start of a prolonged and aggressive series of increases," said Pill.
Traders in interest rate futures on Thursday priced the probability of a 25 basis points (bps) rate hike at the next meeting this month at little more than 15%, although that chance rose to more than 70% for the subsequent meeting in November.
The US employment report for August will be in the spotlight later in the day. This report could offer some hints about the US interest rate outlook. Nonfarm Payrolls (NFP) are projected to increase by 56,000 in August. The Unemployment Rate is estimated to remain unchanged at 4.1% during the same period.
“Monthly payrolls readings have been softer in recent months, but low jobless claims and a steady unemployment rate have kept Fed officials unconcerned about the labor market,” said Citigroup economist Andrew Hollenhorst.
BoE November meeting in focus as UK-US spreads stay supportive
Strategists at Scotiabank highlight that market attention is already shifting toward the BoE’s early November gathering, noting that “the November 5th meeting is priced for 18bpts and is also an Inflation Report/forecast meeting and thus should provide for a more fulsome analysis as it will also follow the government’s Autumn Statement/budget scheduled for October 28th.” They add that “UK-US yield spreads remain supportive following this week’s surge,” reinforcing the current backdrop for the Pound even as near-term policy expectations are only modestly recalibrated.
BoE’s Pill leans hawkish with call for prompt rate hike
Pill’s latest speech scores 8.2 on FXS Speechtracker, modestly above the historic 7.9 average, signalling a slightly stronger-than-usual policy signal. The explicit call to raise Bank Rate to 4% and the emphasis on prompt, decisive action to head off second-round effects mark a clear hawkish tilt, even as Pill stresses this need not launch a prolonged or aggressive hiking cycle.
By warning that ‘fine-tuning’ rates amid energy-price uncertainty is problematic and that second-round effects may now be stronger than in the ‘halcyon days’ of inflation targeting, Pill reinforces a bias toward front-loaded tightening. For GBP, the combination of a concrete rate level, a preference for early action, and resistance to extreme ‘what if’ scenarios supports expectations of a near-term hike while tempering bets on an extended series of increases.
Technical Analysis: GBP/USD
In the daily chart, GBP/USD holds a mildly bullish bias as it trades above the 100-day Simple Moving Average (SMA) and the lower Bollinger Band, keeping the recent uptrend structure intact despite a shallow pullback from recent highs. The Relative Strength Index (RSI) around 52 leans slightly positive, suggesting upside pressure is consolidating rather than reversing, though price is now stalling just under the Bollinger mid-line, hinting at near-term congestion.
On the topside, immediate resistance emerges at the Bollinger middle band around 1.3555, with the upper Bollinger Band near 1.3660 acting as the next hurdle if buyers regain control. On the downside, initial support is seen at the lower Bollinger Band near 1.3450, followed closely by the 100-day SMA at 1.3445, where a break would expose a deeper correction and dent the current constructive tone.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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