GBP/USD Eyes 1.3470 as Sterling Gains Ground on Robust UK Retail Data

Pound Sterling climbs toward 1.3470 against the US Dollar as traders reassess market positioning ahead of critical US employment figures. The British currency extends its recent momentum during European hours on Friday, riding on surprisingly strong consumer spending metrics from the United Kingdom. The GBP/USD pair captures attention as the Greenback retreats on softer economic signals ahead of the August Nonfarm Payrolls release scheduled for 12:30 GMT.

UK Consumer Spending Beats Forecasts, Supporting Sterling

The Office for National Statistics released July’s monthly Retail Sales data showing a 0.6% monthly increase—more than double the anticipated 0.2% gain. This upside surprise in consumer demand signals resilience in UK household spending, typically a supportive factor for currency valuations. Year-on-year, Retail Sales expanded 1.1%, albeit slightly undershooting the 1.3% estimate but accelerating from June’s 0.9% pace (revised).

The strength in consumer metrics presents a subtle challenge for the Bank of England’s policy trajectory. While BoE Governor Andrew Bailey acknowledged on Wednesday that rate cuts will likely continue, he emphasized considerable uncertainty regarding the cutting timeline. “The path for rates will continue to be downwards, but there is considerably more doubt on how fast we can cut rates,” Bailey stated during his Treasury Committee appearance. With inflation proving sticky, the BoE is widely expected to hold rates at 4% during this month’s policy meeting.

Dollar Weakness Persists as NFP Looms

The US Dollar Index (DXY) trades 0.25% lower near 98.00, reflecting broad weakness in the Greenback against major currency pairs. Currency markets are pricing in heightened uncertainty surrounding the employment report, with economists forecasting 75,000 nonfarm payroll additions—roughly in line with July’s 73,000 print.

Key labor market metrics carry significant implications for Federal Reserve policy expectations. The unemployment rate is projected to tick up to 4.3% from 4.2%, while Average Hourly Earnings growth is anticipated at 3.7% monthly (down from 3.9% in July), with month-over-month wages expected to rise 0.3%. The ADP Employment Change for August, released Thursday, already signaled slowing private sector hiring, setting a cautious tone for today’s official data.

Market Sentiment Tilts Dovish on Fed Rate Cuts

Traders have increasingly positioned for interest rate cuts in September following July’s downward employment revisions and mounting labor market concerns flagged by Federal Open Market Committee members. According to the CME FedWatch tool, a September rate cut is now viewed as a virtual certainty. The combination of softer labor demand signals and policy guidance has tilted financial markets toward a more dovish Fed outlook, creating favorable conditions for risk assets and commodity-linked currencies.

Currency Performance Snapshot

The US Dollar remains the weakest performer today, particularly against the New Zealand Dollar, which gained 0.52%. Sterling posted a 0.38% advance, while the Japanese Yen and Canadian Dollar also outpaced the Greenback. For perspective on global currency moves, when examining cross-rate relationships: a move of 1.25 million yen to USD equivalent demonstrates the scale of daily capital flows across major pairs. The EUR/GBP pairing showed minimal movement at 0.00%, indicating relative stability between the Euro and Sterling despite broader volatility.

Technical Setup: GBP/USD Consolidates Near Key Moving Average

Pound Sterling consolidates around 1.3470, trading tightly near its 20-day Exponential Moving Average. The 14-day Relative Strength Index (RSI) occupies the 40.00-60.00 neutral zone, confirming a sideways market structure without clear directional bias.

Support Zone: The August 1 low at 1.3140 anchors the downside, representing the key level for potential pullbacks.

Resistance Zone: The August 14 high near 1.3600 caps upside moves, with a break above this level potentially signaling fresh bullish momentum for GBP/USD.

The pair’s ability to hold above the 20-day EMA will be crucial in determining whether Sterling maintains its current footing or retreats into consolidation ahead of the NFP announcement.