GBP/USD at 1.3500: US employment is the key to the next move

The pound sterling remains in a range around the psychologically significant level of 1.3500, which has been a key point for a long time. While the Asian markets are defending against upward momentum from recent surge highs that have lasted for several weeks.

Support Factors from Monetary Policy

The divergence in policy expectations between the Federal Reserve and the Bank of England is the main driver pushing this pair higher. The Bank of England recently cut rates last month with a narrow 5-4 vote, reflecting clear differences of opinion within the committee. Amid recent unexpected inflation signals, investors are adjusting their expectations downward for further easing next year.

Conversely, the US dollar continues to cause market participants concern over future economic data. Although the currency remains strong at the end of the week, it lacks support from increased hopes for Fed easing.

Market Sentiment Diminishing Safe-Haven Demand

The broad positive stock market environment worldwide has created conditions that reduce demand for safe assets like the US dollar. This continues to serve as a tailwind for the pound and is a key factor until major economic data arrives.

Pound Benefits from Eased Worries

Apart from policy factors, the pound has also gained from reduced concerns over the UK fiscal situation, which had previously undermined confidence in the currency. This has significantly slowed the situation.

Key Windows: Thursday and Friday

Retail traders are focusing on several economic releases this week. Thursday will feature the ADP employment report, ISM Services figures, and JOLTS job openings. The climax comes on Friday with the release of the NFP report, which could determine the pair’s direction in the final stage of the week.

Currently, GBP/USD still shows a bullish rally, but it needs additional momentum from US labor data to continue.