Pound breaks higher after weak US jobs print
Market overview: Sterling strength meets softer dollar tone
Sterling is ending the week with momentum, pushing higher across the G10 space and notching fresh one-year highs against the euro, Swedish krona and Canadian dollar.
The pound continues to draw support from elevated UK yields, which make it expensive for markets to hold short sterling positions. With volatility still subdued and global risk sentiment holding firm, investors have had little incentive to rebuild bearish pound positions.
GBP/EUR has broken through the key 1.16 resistance area and briefly tested 1.17, helped by short covering and a relatively quiet UK data calendar. The next test is whether 1.1650, and then 1.16, can now act as support.
There are political risks building in the background, particularly around potential tax rises and higher public spending plans. For now, however, markets appear more focused on rate differentials, global risk appetite and the lack of immediate policy detail.
USD: Payrolls miss knocks the greenback
The US dollar fell to a two-week low after June’s non-farm payrolls report came in weaker than expected.
The US economy added 57,000 jobs, well below forecasts for 113,000. The unemployment rate did offer some support, easing to 4.2% from 4.3%, but this was not enough to prevent a broad dollar sell-off.
The dollar index dropped 0.6% to its lowest level since 18 June. The move was most pronounced against other safe-haven currencies, with USD/JPY down 0.9% and USD/CHF falling 0.7%.
EUR/USD and GBP/USD both advanced 0.5%, with the softer labour market data prompting markets to reassess the strength of the US outlook.
GBP: Yield support keeps sterling in demand
The pound remains well supported heading into the close of the week, with UK rates still among the highest in the major currency bloc.
GBP/USD has recovered much of the ground lost after the Fed’s hawkish 19 June meeting and has moved back above its 21-day moving average near 1.33. The 1.34 level is now the key resistance point, with a break higher likely to challenge the broader downtrend seen since early May.
GBP/EUR has also had a strong run, reaching its highest level in a year at 1.17. The move has been helped by UK yield support, resilient risk sentiment and the absence of fresh domestic data to disrupt the bullish tone.
Political headlines around potential tax rises may become more important over the summer, particularly if they weigh on business and household confidence. For now, markets appear to be treating them as a future risk rather than an immediate sterling negative.
EUR: Breakout leaves euro under pressure versus the pound
The euro has struggled to hold ground against sterling, with GBP/EUR breaking above the long-standing 1.16 resistance area.
The move reflects a mix of sterling demand, short covering and a less compelling euro rate backdrop. The ECB’s softer policy recalibration has also limited the single currency’s ability to push back against the pound.
GBP/EUR’s next major test is whether the former resistance zone can turn into support. A sustained hold above 1.1650 would keep attention on the 1.17 area, while a move back below 1.16 would suggest the breakout is losing momentum.
For EUR/USD, the softer US payrolls report provided support, helping the pair rise 0.5%. However, the euro’s broader direction is still likely to depend on whether markets see further room for dollar weakness.
Looking ahead
GBP/EUR support at 1.1650 and 1.16 will be key in judging whether the recent breakout can hold.
GBP/USD faces important resistance around 1.34, with a break higher likely to improve the technical picture.
Markets will continue to watch US labour data closely for signs that dollar strength is fading.
UK political headlines around tax and spending plans may become a greater focus over the summer.
Rate differentials remain a key driver, with UK yield support still underpinning sterling.