Market Reaction to US Labor Data and GBP/USD Dynamics
Friday’s US jobs report stunned markets as payrolls rose by just 73 000 in July, well below the 110 000 expected, while the unemployment rate ticked up to 4.2 percent. This unexpected softening in hiring sent the dollar tumbling across the board, allowing GBP/USD to surge from a fresh weekly trough near 1.3140 to challenge the 1.3310 zone. The collapse in US Treasury yields and a repricing of Fed rate-cut probabilities—now above 80 percent for September—have undermined the greenback, providing sterling with much-needed relief after a dismal July, when the pound shed nearly 1.9 percent against the dollar.
Tariff Shocks, Risk Appetite, and Sterling’s Resilience
As President Trump slapped 35 percent duties on Canadian imports and threatened broad mutual tariffs, equity futures slumped roughly one percent, sending safe-haven flows back into the dollar briefly. Yet sterling shrugged off that risk aversion on the heels of the NFP surprise, underscoring that Fed policy shifts now dominate sentiment. In contrast, weak UK macro prints in July stoked fears at the Bank of England that rate cuts are imminent. The tug-of-war between UK rate-cut expectations and US rate-cut bets has left GBP/USD oscillating in a widening 1.3140–1.3410 range, with each US data miss reinforcing sterling’s short-term upside.
Technical Patterns Point to Key Inflection Zones
GBP/USD’s rebound parked it below its 50-day simple moving average—at roughly 1.3400 for the first time since April—validating a bearish head-and-shoulders pivot. The daily RSI recovered from oversold levels near 32 to roughly 44, but remains under 50, signaling that momentum is fragile even as buyers step in above the 1.3140–1.3200 support band. A sustained move above the 1.3310 (100% Fibonacci extension) to 1.3400 (78.6% retracement) corridor would neutralize the near-term downtrend and open 1.3460, but failure to defend the May low exposes 1.3010 and even the 1.2900 zone. Meanwhile, the 30-period SMA on the four-hour chart sits at 1.3298, and price action around that average will determine if bears reassert control or if a bullish shift takes hold.
Cross-Currency Flows and Broader Sentiment Trends
This week’s FX heat map revealed the pound as one of the week’s weakest performers, down nearly 1.9 percent versus the US dollar, while currencies with stronger rate-cut narratives saw additional pressure. USD/CHF bounced off its 50-day EMA in line with dollar weakness, and EUR/USD remains tethered to 1.1380 ahead of Eurozone HICP and US NFP releases. GBP/JPY and GBP/AUD have similarly mirrored sterling’s directional moves, reinforcing that GBP/USD’s swings reflect a global liquidity repricing rather than UK-specific drivers alone.
After weighing the data, technical structure, and cross-market flows, GBP/USD currently offers a tactical buy on dips toward 1.3200, with a medium-term target toward 1.3400–1.3460, provided US labor misses continue and UK rate-cut expectations remain unfulfilled. Conversely, traders should remain vigilant of a break below 1.3140, which could ignite a deeper slide toward 1.3010. At present, a hold stance is warranted for longer-term accounts, while nimble traders may look to buy near support with stops under 1.3140 and targets near the 50-day SMA.
