Sterling today: Pound slips as dollar steadies ahead of U.S. payrolls
Sterling traded marginally lower on Thursday while the euro fell, as investors adopted a cautious wait-and-see stance ahead of Friday’s US non-farm payrolls report, with hawkish Federal Reserve commentary underpinning the greenback.
Intelligence analysis by Llama
Investors are adopting a cautious wait-and-see stance ahead of Friday’s US non-farm payrolls report, with the dollar broadly range-bound. The pound has been broadly supported above $1.345 by geopolitical risk sentiment rather than domestic policy factors.
Imagine you're waiting for a big test at school. You're not sure how you'll do, so you're being careful and not taking any risks. That's kind of what's happening with the dollar and the euro right now. They're waiting to see how the US will do on its test, which is a big report about jobs. If the US does well, the dollar might get stronger, and the euro might get weaker.
Analysis
Sterling's Decline Not Driven by UK-Specific Fundamentals
Sterling's decline was not driven by UK-specific fundamentals. The pound has been broadly supported above $1.345 by geopolitical risk sentiment rather than domestic policy factors. Last week's Bank of England meeting left rates unchanged, with Governor Andrew Bailey downplaying the need for further tightening and arguing the disinflation process remains on track despite lingering external uncertainties.
Euro Holds Close to a Seven-Week High
The euro held close to a seven-week high, underpinned by easing energy prices expected to moderate eurozone inflationary pressures, and by stronger-than-expected German factory orders for June. "EUR/USD has been retesting the 1.1550-1.1560 resistance area," Pesole said. "We do not see a fundamental catalyst for a break higher unless US data disappoint tomorrow." ING sees the pair stabilising in the 1.1530-1.1550 area through the payrolls release.
Near-Term Trajectories Hinge on Friday's US Payrolls Print
Both pairs' near-term trajectories hinge almost entirely on Friday's US payrolls print. A soft reading could reignite the dollar selloff and push EUR/USD through 1.1560 resistance; a strong number would cement Fed hawkishness and return the greenback to the offensive. No domestic UK or eurozone catalysts are expected before then.
Key points
- Sterling traded marginally lower on Thursday while the euro fell, as investors adopted a cautious wait-and-see stance ahead of Friday’s US non-farm payrolls report.
- The pound has been broadly supported above $1.345 by geopolitical risk sentiment rather than domestic policy factors.
- The euro held close to a seven-week high, underpinned by easing energy prices expected to moderate eurozone inflationary pressures, and by stronger-than-expected German factory orders for June.
If the US payrolls report is strong, it could cement Fed hawkishness and return the greenback to the offensive, potentially leading to a stronger dollar and a weaker euro.
If the US payrolls report is soft, it could reignite the dollar selloff and push EUR/USD through 1.1560 resistance, potentially leading to a weaker dollar and a stronger euro.