Sterling edged up 0.14% as softer US data checked the Dollar\u2019s broader strength, with GBP\/USD at 1.3277 after touching 1.3219. Federal Reserve Chair Kevin Warsh reiterated that the Fed would not offer forward guidance and said inflation remains above its 2% target while the labour market is steady. The US Dollar Index was little changed on the remarks and stood at 101.34, up 0.17%, as markets weighed mixed economic signals.<\/p>\n\n
ADP private payrolls for June came in at 98K versus estimates of 113K and were below May\u2019s 122K, while Challenger job cuts fell 53% from 97,006 to 45,849. Employers announced 443,604 job cuts, down 40% year on year, and attention now turns to Thursday\u2019s Nonfarm Payrolls, seen at 110K, with unemployment forecast to hold at 4.3%. In the UK, political risk was tempered by a pledge to stick to fiscal rules after Keir Starmer\u2019s resignation, while swaps price at least one Bank of England rate rise in 2026; technically, GBP\/USD remains below the SMA cluster at 1.3415, with resistance near 1.3524, RSI around 44 and support near 1.3159.<\/p>\n\n
We are approaching the upcoming US Nonfarm Payrolls (NFP) report with caution, as it is the most critical event this week. The soft ADP private payrolls figure of 98,000 sets a weak tone, but we have seen significant divergence between ADP and NFP reports before. For example, historical data from early 2024 repeatedly showed NFP figures surprising to the upside, so we must be prepared for a stronger-than-expected number that could reignite Dollar strength.<\/p>\n\n
The Federal Reserve is signaling it will not be swayed by one or two soft data points, keeping its focus firmly on inflation. With the latest annual core PCE price index, the Fed’s preferred inflation gauge, still holding at 2.8%, officials have little reason to pivot away from their hawkish stance just yet. We believe the market may be underestimating the Fed’s resolve to keep rates elevated until inflation is convincingly beaten.<\/p>\n\n
From the UK side, political stability under the new leadership is a positive, but it does little to boost the Pound Sterling. The bigger factor is the Bank of England, where expectations for a rate hike have softened considerably, especially after recent UK CPI data showed inflation falling to the central bank’s 2.0% target. This monetary policy divergence between a hawkish Fed and a neutral BoE will likely cap any significant rallies in the GBP\/USD pair.<\/p>\n\n
Given the bearish technical backdrop, with GBP\/USD struggling below the 1.3415 moving average, we see the current strength as a selling opportunity. For derivative traders, the high event risk from the NFP report makes buying put options an attractive strategy. This allows us to position for a potential drop back toward the 1.3159 support level while capping our potential losses if the US data misses expectations again.<\/p>\n\n\n\n