FX Movements

Sterling appreciated 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 advanced, reaching $1.1455, up 0.18% as of 07:30 ET (11:30 GMT). The broader dollar index fell after a weaker‑than‑expected U.S. jobs report.

U.S. Jobs Data

The U.S. payroll report showed a modest increase of 57,000 jobs, which was more than offset by 74,000 downward revisions to the prior two months. Unemployment slipped to 4.2%, a decline driven primarily by a lower labor‑force participation rate, indicating reduced worker engagement.

Market Commentary

Francesco Pesole, FX strategist at ING, noted that the jobs report makes it harder for markets to rebuild expectations of two Federal Reserve rate cuts, though the data is not weak enough to trigger a strong dovish shift. He highlighted that more than 25 basis points of easing remain priced into the December futures contract. ING projects the dollar index to stabilise within a 100‑101.5 range in the coming weeks rather than entering a sustained downtrend.

Central Bank Signals

Investors await remarks from Federal Reserve official Mary Daly later on Friday, followed by releases of initial jobless claims, factory orders and durable goods data, ahead of the July 14 U.S. CPI report, which is seen as the next key test for rate‑hike pricing.

UK Perspective

Sterling’s rise was not underpinned 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 that higher mortgage rates have already tightened monetary conditions, leaving policy hikes unnecessary and keeping rate cuts off the table.

Risk Sentiment

Easing risk sentiment in the Middle East, highlighted by Qatar’s indication of a fresh round of indirect U.S.–Iran talks, provided modest support to risk‑on currencies, including sterling.

Euro Outlook

The euro’s gains were limited by a fading ECB tightening narrative. Pesole observed that EUR/USD price action underscores 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 and forecasts a move above $1.16 only late in the summer.

Dollar Outlook

ING maintains a bearish view on the dollar for the second half of the year, stating that a sustained break in the dollar’s decline would likely require confirmation from the July 14 CPI print or a shift in Fed rate‑hike expectations.