Market Overview
The British pound advanced on Friday, with GBP/USD climbing to $1.3360, a 0.10% rise on the day and positioning the pair for a weekly gain. The euro also appreciated, reaching $1.1455, up 0.18% as of 07:30 ET (11:30 GMT). Both moves occurred as the U.S. dollar weakened broadly following a weaker‑than‑expected U.S. jobs report.
U.S. Employment Data
The employment report showed a modest payroll increase of 57,000 jobs, which was more than offset by 74,000 downward revisions to the prior two months. The unemployment rate slipped to 4.2%, a decline attributed mainly to a lower labor‑force participation rate, signaling reduced worker engagement.
FX Commentary and Rate‑Cut Expectations
ING FX strategist Francesco Pesole noted that the report makes it harder for markets to rebuild expectations of two Federal Reserve rate cuts, although the data were not weak enough to trigger a pronounced dovish shift. He highlighted that more than 25 basis points of easing remain priced into the December futures contract. ING projects the dollar index will stabilize in a 100‑101.5 range in the coming weeks rather than entering a sustained downtrend.
Forward‑Looking Economic Calendar
Markets are awaiting a speech later on Friday from Federal Reserve official Mary Daly, as well as upcoming releases of initial jobless claims, factory orders, and durable goods data. The next major test for rate‑hike pricing will be the U.S. CPI report scheduled for July 14.
UK and Eurozone Context
The pound’s rise was not driven by UK fundamentals. Bank of England Governor Andrew Bailey, speaking at the ECB’s Sintra forum, described the UK economy as being in a “soft patch” and said higher mortgage rates have already tightened monetary conditions, leaving policy cuts off the table for now. Meanwhile, the euro’s gains were limited by a fading ECB tightening narrative. Pesole observed that EUR/USD price action reflects a lack of a convincing bullish story for the euro, with markets pricing September ECB tightening at just 11 basis points and year‑end tightening at 17 basis points after softer‑than‑expected June inflation and persistently low oil prices. ING expects euro rallies to lose momentum beyond the 1.150‑1.153 range, forecasting a return above $1.16 only late in the summer.
Geopolitical and Risk Sentiment
Easing risk sentiment in the Middle East, highlighted by Qatar’s signal of a fresh round of indirect U.S.–Iran talks, provided modest support to risk‑on currencies, including sterling.
Outlook for the Dollar
ING maintains a bearish view on the dollar for the second half of the year, noting that a sustained break higher would likely require confirmation from the July 14 CPI print or a shift in Fed rate‑hike pricing expectations.