Mid-1.3400s: British Pound holds steady against softer USD, awaits US NFP catalyst

GBP/USD steadies as softer USD checks the previous day’s pullback from its highest since mid-September.
Lower US bond yields and hopes for diplomacy over Iran leave USD bulls under pressure.
Ahead of the key US NFP release, the BoE’s hawkish stance provides additional support for GBP.

GBP/USD trades just above 1.3450, only 0.05% higher on the day. Dip-buying during Friday’s Asian session has checked the previous day’s retreat from just above the psychological 1.3500 level, its highest since mid-September. With the crucial monthly US employment figures still to come, traders appear reluctant to take aggressive positions.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

December policy expectations for the US Federal Reserve (Fed) hinge heavily on the US Nonfarm Payrolls (NFP) report. The release will consequently shape demand for the US Dollar (USD) and give GBP/USD fresh direction. Before that major data event, sharply lower US bond yields and hopes for diplomacy over Iran are weighing on the safe-haven USD, lending the pair some support.

Expectations of political gridlock have risen following the Democrats’ overwhelming US midterm election victory. Such an outcome could constrain government spending and slow economic growth. On Wednesday, top Senate Democrat Chuck Schumer also pledged to press for an end to the Iran war, triggering a weekly decline of over 10% in crude oil prices. The resulting easing of inflation concerns has pushed US bond yields towards a near two-month low, limiting support for the safe-haven USD.

For the British Pound (GBP), support comes from a hawkish turn at the Bank of England (BoE). The central bank raised interest rates for the first time in more than three years and signalled that another increase is likely unless the US-Iran war is resolved. Chancellor John Healey’s 2026 Autumn Budget has also reduced the immediate risk of a runaway fiscal crisis. This is viewed as a further supportive factor for GBP and GBP/USD.

A fourth consecutive weekly gain nevertheless remains in sight for the pair. With the fundamental backdrop still supportive, any corrective decline could attract buying interest and is more likely to prove short-lived.

GBP/USD: daily price chart

Technical Outlook

At 1.3421, the 200-day Simple Moving Average (SMA) remains below GBP/USD, as do key Fibonacci support levels. This points to a favourable near-term bias. Within the wider recovery from the 1.3138 cycle low, the pair is now testing a cluster of retracement levels. Immediate upside is capped by the 61.8% Fibonacci retracement at 1.3470, the next barrier for buyers.

Clearing the 61.8% Fibonacci retracement decisively would put the 78.6% level at 1.3560 in focus. Beyond that lies the August swing high of 1.3674, where a more substantial supply zone could develop. Initial downside support sits at the 200-day SMA of 1.3421, with the 50.0% retracement at 1.3406 next. A deeper correction would likely bring the 38.2% retracement at 1.3343 into view.

(An AI tool assisted in preparing this article’s technical analysis. Find out more.)

Pound Sterling: Key Questions

Pound Sterling: what defines the currency?

Dating back to 886 AD, the Pound Sterling (GBP) is the world’s oldest currency and the United Kingdom’s official currency. Figures for 2022 rank it fourth globally by foreign exchange (FX) trading activity: it represents 12% of all transactions, with average daily turnover of $630 billion. Among its main currency pairs, GBP/USD, known as ‘Cable’, accounts for 11% of FX trading. GBP/JPY, called the ‘Dragon’ by traders, represents 3%, while EUR/GBP accounts for 2%. The Bank of England (BoE) issues the Pound Sterling.

Bank of England policy: how does it affect Sterling?

Monetary policy set by the Bank of England has the greatest influence on the Pound Sterling’s value. Decisions centre on whether the BoE is meeting its core objective of “price stability”, meaning inflation holding steady at around 2%. Interest-rate adjustments are its main means of achieving that goal. To curb excessive inflation, the BoE raises interest rates, increasing borrowing costs for households and businesses. GBP generally benefits because higher rates increase the UK’s appeal to international investors seeking a home for their funds. By contrast, inflation that is too low indicates slowing economic growth. The BoE will then consider cutting rates to make credit cheaper, encouraging businesses to borrow more for investment in projects that generate growth.

Economic indicators: what drives the Pound’s response?

The Pound Sterling can respond to economic releases because they reveal the economy’s health. GDP, Manufacturing and Services PMIs, and employment figures can all help determine GBP’s direction. Sterling benefits from economic strength through greater foreign investment and the possibility that the BoE will raise interest rates, directly supporting GBP. Weak economic figures, by contrast, are likely to weigh on the Pound Sterling.

Trade Balance: why does it matter for the Pound?

The Trade Balance is another important release for the Pound Sterling. Over a specified period, it compares a country’s export earnings with its spending on imports. Strong overseas demand for a country’s exports creates additional demand for its currency as foreign buyers purchase those goods. A positive net Trade Balance therefore supports the currency, while a negative balance has the opposite effect.