British Pound strengthens above 1.3500 as BoE stays hawkish, traders brace for US NFP data
- GBP/USD gains traction to near 1.3530 in Friday’s early European session.
- BoE Pill's hawkish remarks underpin the British Pound.
- All eyes will be on the US August employment report on Friday.
The GBP/USD pair edges higher to around 1.3530 during the early European trading hours on Friday. Hawkish rhetoric from a Bank of England (BoE) policymaker provides some support to the British Pound (GBP) against the US Dollar (USD). Traders will keep an eye on the US August employment report later on Friday.
Bank of England (BoE) Chief Economist Huw Pill said on Thursday that the central bank should raise its key interest rate to limit the risk that inflation will stay above its target for a prolonged period, even though the course of the war in the Middle East remains highly uncertain. Pill was joined by two other members in voting for a rate hike in July, with six members backing a hold.
Traders in interest rate futures on Thursday priced the chance of a 25-basis-point (bps) rate increase at the upcoming policy meeting in September at little more than 15%, although that chance rose to more than 70% for the subsequent meeting in November.
Attention will shift to the US jobs data later in the day, which could help shape expectations for the Federal Reserve's (Fed) next policy move. The Nonfarm Payrolls (NFP) report is expected to show 56,000 jobs added in August, while Unemployment Rate is projected to hold steady at 4.1% during the same period. A robust jobs report could reinforce the Fed's move to raise the interest rate and boost the Greenback in the near term.
GBP downside risk persists as UOB watches key levels
Strategists at UOB Group maintain a cautious stance on GBP in the 1–3 week horizon, reiterating that “the risk for GBP remains on the downside, and the level to watch is 1.3480.” They note that this technical objective was achieved on Tuesday, with the pair “dropping to a low of 1.3475.” While they judge that “the downside risk for GBP remains intact,” UOB highlights that “there has been no clear increase in downward momentum, and it is left to be seen whether the next technical target at 1.3415 is within reach.” On the topside, the bank flags that “a breach of 1.3545 (‘strong resistance’ level previously at 1.3570) would indicate that the downward pressure from last Friday has eased.”
Pill signals front-loaded BoE hike but plays down extended tightening
Pill’s latest remarks score 8.2 on FXS Speechtracker, modestly above the 7.9 historic average, underscoring a slightly more forceful tone than usual. 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 relative to Pill’s past communications.
However, Pill’s insistence that such a move “need not be the start of a prolonged and aggressive series of increases” tempers the hawkishness, framing this as a front-loaded adjustment rather than the start of a full-blown tightening cycle. For GBP, this mix of near-term hawkish action and medium-term caution supports a stronger bias in the short run, while the warning against extreme “what if” scenarios and fine-tuning in the face of energy-price uncertainty suggests the MPC will avoid over-committing to a long hiking path.
Technical Analysis: GBP/USD maintains a constructive outlook above the 100-day SMA
In the daily chart, GBP/USD retains a mildly bullish near-term tone as price holds above recent closing levels while still facing a dense cap formed by the 100-day simple moving average (SMA) at 1.3443 and the Bollinger band structure overhead, with the middle band near 1.3555 and the upper band around 1.3661. The Relative Strength Index (RSI) at 51.5 has eased back toward neutral, hinting at consolidative rather than impulsive conditions as buyers attempt to extend the latest advance.
On the topside, initial resistance is seen at the 100-day SMA around 1.3443 and the nearby lower segment of the recent Bollinger envelope near 1.3450, with more notable supply emerging at the Bollinger middle band around 1.3555 and then the upper band close to 1.3661. A daily close above the mid-band would open the way toward retesting the upper Bollinger band, while failure to clear the 1.3550 area would leave the pair vulnerable to a pullback toward prior session lows, even if clearly defined moving-average support is still lacking on the current configuration.
(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.