The British pound (GBP) dipped below 1.3400 on Friday, experiencing a decline of 0.37% against the US dollar (USD) after the recent US non-farm payrolls report exceeded predictions. This data suggests that the economy might be approaching full employment. In related news, Iran is backing Hezbollah’s stance on the US ceasefire proposal concerning Israel and Lebanon, which could complicate negotiations between Iran and the US.
The US dollar rises on strong NFP report
In May, U.S. nonfarm payrolls increased by 172,000 jobs, surpassing the expected 85,000 gain. This bolstered the Federal Reserve’s argument to prioritize tackling inflation, highlighting a resilient labor market. Additionally, the unemployment rate remains steady at 4.3%, strengthening the case for potential rate hikes.
This favorable employment data contributed to the US dollar’s strength, pushing the dollar index (DXY) against a range of six currencies up by 0.38% to 99.80, after it recovered from earlier lows around 99.15.
Investors anticipate Fed rate increases by late 2026
Beth Hammack from the Cleveland Fed indicated that while it’s sensible to keep rates steady for now, there could be a need for action to address high inflation soon if trends continue.
According to Prime Terminal data, money markets are estimating a 67% likelihood that the Federal Reserve will hike interest rates in December, though traders expect rates to remain unchanged in June.
GBP/USD impacted by UK political dynamics
In the UK, Mr. Cable is seen as less influential, but there are hopes that the Bank of England (BoE) may raise rates sooner than the Fed, with swap markets indicating a potential tightening of 45 basis points by year-end. However, political instability could put pressure on the pound, as Labor mayor Andy Burnham has challenged Keir Starmer’s leadership and suggested he should step down if he wins this month’s election.
Reports from iPaper suggest that the government might consider keeping Rachel Reeves as prime minister if she wins.
Upcoming economic data
This coming week, the US will release consumer and producer inflation data along with unemployment claims. In the UK, the schedule includes reports on retail sales for May, as well as GDP and industrial production statistics.
GBP/USD technical analysis
Currently, GBP/USD is trading at 1.3375. It remains below the 50-day, 100-day, and 200-day simple moving averages (SMA) clustered around 1.3454, indicating a bearish trend in the short term. Prices are near a point of resistance from a downtrend and support from an uptrend, suggesting a struggle in key areas. The Relative Strength Index is around 42, hinting slightly downward without reaching an oversold situation.
Resistance is first seen at the SMA band near 1.3454. A daily close above this level could relieve some downside pressure and support a stronger recovery. Conversely, if sellers gain traction, the currency pair could face further declines as the broader conditions favor a bearish outlook while GBP/USD operates below the multi-period SMA cluster.
(Technical analysis in this story was assisted by AI tools.)
