Pound sterling price trades lower against USD ahead of U.S. Nonfarm Payrolls data
Pound Sterling struggles near 1.2420 as BoE signals dovish stance
The Pound Sterling (GBP) edged lower against the U.S. dollar (USD) on Friday, trading around 1.2420 as investors remained cautious ahead of the US Nonfarm Payrolls (NFP) report. The economic data, due later in the day, is expected to set the tone for the Federal Reserve’s monetary policy, influencing USD strength in the near term.
Market participants are also factoring in the Bank of England’s (BoE) dovish stance, which contributed to GBP weakness following its recent interest rate cut.
GBP/USD price dynamics (Dec 2024 - Feb 2025) Source: TradingView.
US NFP report in focus as Fed maintains cautious stance
The US Federal Reserve (Fed) continues to emphasize a data-driven approach before making any monetary adjustments, making today’s NFP report crucial for market sentiment. Analysts anticipate that the U.S. economy added 170,000 jobs in January, a decline from the 256,000 recorded in December. The unemployment rate is projected to hold steady at 4.1%, while average hourly earnings growth is expected to ease slightly to 3.8% year-on-year from the previous 3.9%.
Fed policymakers, including Dallas Fed Bank President Lorie Logan and Fed Chair Jerome Powell, have reiterated their preference for holding interest rates steady until there is clear evidence of either weaker labor market data or significant disinflationary progress. This hawkish stance has bolstered the US dollar, weighing on the GBP/USD pair ahead of the employment report.
BoE Rate cut and revised GDP outlook pressure pound
The Bank of England’s decision to cut interest rates by 25 basis points to 4.5% led to a sharp sell-off in GBP, as policymakers revised UK GDP growth projections downward from 1.5% to 0.75% for the year. The move signals the BoE’s growing concerns about sluggish economic activity.
A significant factor behind the pound’s decline was Monetary Policy Committee (MPC) member Catherine Mann, who surprised markets by supporting a larger 50 basis point rate cut. This unexpected dovish turn highlighted heightened concerns among policymakers regarding the economic outlook. However, BoE Governor Andrew Bailey maintained that any further rate reductions would be gradual, citing risks of inflation temporarily rising to 3.7% in Q3 before stabilizing near the 2% target.
Technical analysis and outlook for GBP/USD
The GBP/USD pair remains range-bound, failing to break key resistance at 1.2500, where the 50-day Exponential Moving Average (EMA) continues to cap gains. The 14-day Relative Strength Index (RSI) remains in a neutral range between 40 and 60, reflecting consolidation rather than a strong directional move.
Key support levels to watch include 1.2100 (January 13 low) and 1.2050 (October 2023 low). On the upside, resistance remains at 1.2607 (December 30 high), with a breakout above this level required to confirm a bullish reversal.
In previous GBP/USD technical analysis, the pound struggled to maintain bullish momentum amid BoE’s dovish tilt and Fed’s cautious stance on rate cuts. The currency pair failed to break above resistance at 1.2500, reinforcing downward pressure, while investors awaited further signals from US labor market data.
