Sterling traded marginally lower on Thursday while the euro slipped, as market participants adopted a cautious stance ahead of Friday's U.S. non-farm payrolls release. The greenback was underpinned by hawkish-leaning Federal Reserve commentary, keeping dollar moves contained despite developments that favoured risk assets.
At 07:00 ET (11:00 GMT), GBP/USD was quoted at 1.3463, down 0.04%. EUR/USD traded at 1.1543, down 0.10%.
The dollar stabilised even after a risk-on impulse triggered by an Iran-Oman agreement to open a shipping corridor through the Strait of Hormuz. That deal helped push Brent crude below $80 per barrel and eased some inflationary pressure expectations, but the move did not markedly weaken the greenback.
Market positioning ahead of payrolls
Traders signalled a wait-and-see approach as they positioned for Friday's payrolls print. "With payrolls looming tomorrow, a wait-and-see stance may keep volatility contained and the dollar broadly range-bound," said Francesco Pesole, FX Strategist at ING.
Fed rate expectations remained largely unchanged since July's Federal Open Market Committee announcement. Markets were pricing around 14-17 basis points of easing for September and 30-35 basis points by December despite the week's pronounced oil decline.
On the speaker front, Fed officials Mary Daly, Michelle Bowman Cook, and Neel Kashkari adopted hawkish-leaning tones on Wednesday, reinforcing the narrative that policy remains data-dependent and that upside surprises in U.S. labour or activity data could sustain tighter policy expectations.
Incoming data this week offered mixed signals. The ADP private payrolls figure was softer-than-expected at 44,000. The ISM services survey beat expectations with a headline reading of 54.1, but its employment sub-index fell to 47.5, which introduces mild downside risk to Friday's official jobs number.
Pound moves not driven by domestic developments
The pound's modest decline was not attributed to fresh UK-specific macro drivers. Instead, sterling has found support above the $1.345 area on the back of geopolitical risk sentiment rather than changes in domestic policy expectations.
Last week's Bank of England meeting left policy rates unchanged. Governor Andrew Bailey emphasised that further tightening was not currently necessary and stated that the disinflation process remained on track despite persistent external uncertainties.
Euro supported by energy dynamics and German orders
The euro remained close to a seven-week high, buoyed by lower energy prices, which are expected to help moderate eurozone inflationary pressures, and by stronger-than-expected German factory orders for June.
Pesole noted technical dynamics around the euro-dollar pair: "EUR/USD has been retesting the 1.1550-1.1560 resistance area. We do not see a fundamental catalyst for a break higher unless US data disappoint tomorrow." ING expects EUR/USD to stabilise in the 1.1530-1.1550 range through the payrolls release.
Outlook and immediate drivers
Near-term direction for both GBP/USD and EUR/USD is set to depend heavily on Friday's U.S. payrolls reading. A soft payrolls result could revive dollar weakness and push EUR/USD above the 1.1560 resistance level. Conversely, a strong payrolls print would reinforce the Fed's hawkish stance and likely return the dollar to a more assertive position.
Markets are not looking for significant domestic UK or eurozone catalysts before the U.S. jobs report, leaving payrolls as the primary near-term event for currency traders.
Data snapshot
- GBP/USD: 1.3463, -0.04% (07:00 ET / 11:00 GMT)
- EUR/USD: 1.1543, -0.10%
- Brent crude: below $80 per barrel (down week-to-date)
- ADP private payrolls: 44,000
- ISM services: 54.1; employment sub-index: 47.5