US Employment Data Looms as Pound Sterling Weakens Against the Dollar

GBP/USD retreats to 1.3435 as investors brace for critical American jobs and services data

The British currency found itself under pressure during the European session on Thursday, with the Pound Sterling sliding toward 1.3435 against the Dollar. This move follows a day of volatility triggered by softer-than-expected US job openings figures, which reignited rate-cut expectations for the Federal Reserve. The Dollar Index, which measures the Greenback’s performance across six major currency pairs, climbed back to 98.25 after Wednesday’s sharp pullback.

What sparked the Dollar’s Wednesday decline? US JOLTS Job Openings for July disappointed markets, arriving at 7.18 million versus the anticipated 7.4 million and the preceding month’s 7.35 million. The weaker labor market reading immediately shifted the narrative around Fed policy, with markets now pricing in a 97.6% probability of a September rate cut—up sharply from the 92% odds before the data release. This sea change in monetary policy expectations has kept currency markets fluid as traders reassess global rate differentials.

Mixed Signals From the Bank of England Shape Sterling Sentiment

The Pound’s broader stability against its peers masks internal confusion about the UK’s rate trajectory. Bank of England officials delivered conflicting guidance to Parliament’s Treasury Committee, leaving investors scrambling to parse the central bank’s true intentions.

Bailey’s cautious stance on cuts: BoE Governor Andrew Bailey struck a notably dovish tone, admitting he harbors “considerably more doubt on how fast we can cut rates” despite acknowledging the overall downward path. He further emphasized concern about labor market weakness, suggesting the MPC understates downside employment risks. This acknowledgment of rate-cut hesitation represents a subtle shift in messaging.

The hawkish counter-narrative: Deputies Clare Lombardelli and Megan Greene painted a starkly different picture, warning that accelerating monetary easing could jeopardize the inflation target at 2%. Both officials endorsed August’s hold on rates, citing persistent upside inflation concerns. Their remarks seemed designed to anchor expectations against aggressive cutting cycles.

A dissenting voice: MPC member Alan Taylor broke ranks, advocating for faster reductions and even supporting a 50 basis point cut in August before settling for 25 basis points to secure majority consensus. His position underscores genuine disagreement within the committee about the appropriate pace of normalization.

On the broader gilts situation, Bailey dismissed concerns as globally synchronized rather than UK-specific, noting the government hasn’t materially expanded debt issuance.

What’s Next: The August Jobs and Services Report

Traders will laser-focus on two August US releases during the North American session: the ADP Employment Change and the ISM Services PMI.

The private-sector employment print is expected to show 65,000 new jobs added—a dramatic decline from July’s 104,000. Meanwhile, the Services PMI is forecast at 51.0, edging up from the previous 50.1 reading. These figures carry outsized importance given the Fed’s employment mandate and the recent softness in hiring momentum. A significant miss could accelerate the dollar’s decline and boost sterling recovery potential.

Technical Picture: GBP/USD Trapped Below Key Resistance

From a technical standpoint, the Pound Sterling remains under pressure, trading beneath the 20-day Exponential Moving Average at 1.3463. The 14-day Relative Strength Index oscillates comfortably within the 40-60 neutral band, suggesting neither overbought nor oversold conditions—simply directionless consolidation.

The downside floor appears anchored around the August 1 low of 1.3140, while any recovery faces a barrier near the August 14 high of 1.3600. The pair remains vulnerable to headline risk, particularly from the incoming US labor and services data, which could catalyze sharper directional moves in either direction.

In essence, sterling weakness against the dollar remains tied to relative monetary policy expectations rather than fundamental economic divergence—a situation that could shift dramatically depending on Friday’s employment and PMI surprise.