The GBP/USD pair stayed steady around 1.3745 during the Asian trading session. Traders were waiting for the US ADP Employment Change report. US Federal Reserve Chair Jerome Powell indicated a patient stance on future interest rates, although a rate cut in July wasn’t completely dismissed. The likelihood of a July rate cut increased, with futures showing about a 25% chance. The GBP/USD pair climbed towards new highs, supported by a weaker US Dollar amid ongoing trade tensions and proposed tariffs from President Trump.

Trade And Budget Concerns

Trade and budget worries took priority over economic data. The Senate approved a version of Trump’s spending bill, which significantly added to US debt. The Pound dipped slightly against the Dollar after reaching a three-year high, affected by US economic data and dovish comments from the Bank of England’s Governor Bailey. The Pound traded at 1.3721, reflecting a slight drop of 0.07%. US job openings in May rose to 7.769 million, exceeding expectations, while ISM data for June showed some improvement, even though business activity continued to decline. With the GBP/USD pair stabilizing around 1.3745 during the quiet Asian session, attention now shifts to upcoming reports from the US. A wait-and-see attitude prevails, largely driven by expectations related to the US labor market, particularly the ADP employment change. Powell’s recent comments hint at possible future actions. While he didn’t provide a specific timeline, his willingness to consider rate cuts—though cautiously—keeps the option open for July. Futures markets reflect this, showing a 25% chance of a cut next month, giving traders a framework to align their strategies ahead of the Federal Reserve’s next meeting.

Sterling’s Recent Performance

Sterling edged closer to recent highs, partly helped by a weaker dollar. The US currency struggles as traders ponder the potential return of tariffs and concern over federal spending. The Senate supported a version of the White House spending plan, adding more debt amid ongoing fiscal caution. This creates a situation where market sentiment may influence short-term price movements more than economic data. The Pound saw a small pullback from its recent peak—not a significant drop, but enough to attract attention. The 0.07% decline after reaching three-year highs came as traders balanced hawkish labor signals with dovish tones from both domestic and international monetary leaders. Bailey’s cautious comments mirrored Powell’s hesitance and softened earlier momentum for the Pound. Nonetheless, fundamentals still generally favor Sterling. US job data surprised positively, with openings rising past forecasts to 7.77 million, likely providing some support for the Dollar. However, the reaction was muted, possibly due to overarching concerns affecting confidence, especially regarding consumer trends and predictive indicators. ISM figures showed a slight increase, but not sufficient to alleviate worries about the strain on business activity. Moving forward, short-term positioning will heavily depend on upcoming macroeconomic reports. Given the uncertainty around rates and trade, making directional bets is challenging. It’s not solely about predicting the Fed or reacting to every data release—it’s about recognizing when markets misprice risks and preparing strategies accordingly. In this context, rate expectations seem fluid, and bond yields are under pressure as investors seek safer options. This suggests that a defensive approach is favored, especially for those trading implied volatility. Cross-asset indicators highlight the need to monitor yield spreads, particularly between gilts and Treasuries. While sentiment is less extreme than last year, it remains unsettled. Trading volumes are stable but could increase with forthcoming US payroll data and more insights into consumer demand. The immediate risk for the Pound looks more influenced by international factors than local developments. Nonetheless, Bailey’s input shouldn’t be overlooked, as it shapes expectations ahead of the next MPC guidance. Markets are currently influenced by a narrative shaped by economic releases and fiscal challenges, along with uncertainties in international trade. Managing this narrative—anticipating where volatility might arise next week—could yield better results than simply responding to macro surprises. Create your live VT Markets account and start trading now.

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