Pound blistering Q2 run over 6 % versus the dollar hit a wall on Wednesday as GBPUSD recoiled from 1.3800 to 1.3700 in early European trade. Profit-taking was the initial spark, but the real accelerant was a two-pronged macro surprise: robust U.S. labour demand and a dovish lurch from key Bank of England voices.
Dollar Revival on Surging US Job Openings
Tuesday’s JOLTS report showed 7.769 million vacancies in May nearly half-a-million more than forecast and the highest since November 2024. The data suggest firms are still scrambling for workers, supporting wage growth and casting doubt on imminent Fed easing. The U.S. Dollar Index (DXY) bounced off three-year lows near 96.40 to flirt with 96.90.
Fed Chair Jerome Powell, speaking at the ECB’s Sintra Forum, doubled down on his “wait-and-see” message, stressing that trade-tariff uncertainty and still-sticky inflation warrant patience—a tone that contradicted President Trump’s hand-written plea for faster cuts.
BoE Bailey & Taylor Sound Caution
Across the Channel, BoE Governor Andrew Bailey told CNBC that the U.K. labour market is “softening” and investment decisions are being postponed amid global uncertainty. Meanwhile, external MPC member Alan Taylor stunned markets by arguing that five 25-bp cuts are required this year to steer rates toward a neutral 2.75 %–3 %.
Taylor already known for voting for back-to-back reductions in May and Junewarned the U.K.’s “soft landing” is at risk, citing weaker demand and trade disruptions. His remarks slashed front-end gilt yields and erased part of sterling’s rate-premium over the dollar.
Macro Divergence: UK Cooling vs US Resilience
Metric Latest U.K. Reading Trend Latest U.S. Reading Trend
Unemployment rate 4.4 % (Apr) edging higher 3.9 % (May) steady
Job vacancies –100k QoQ falling +374k MoM rising
Average weekly earnings 5.7 % y/y slowing 4.1 % y/y steady
ISM / PMI manufacturing 51.2 (UK PMI) expansion 49.0 (ISM) contraction moderating.
The table underscores a widening growth-and-rates gap. U.K. businesses report hiring freezes and wage offers cooling, while U.S. companies still chase scarce talent—even as production remains sub-50. The divergence has re-energised dollar bulls.
Technical Picture: Poumd Rally Pauses, Not Yet Reversed
Pound Level Significance
1.3800 July-2025 high & upper Bollinger band
1.3760 100-hour SMA, intraday resistance
1.3700 European session low, psychological handle
1.3650 20-day EMA & March-high retest
1.3580–1.3600 50-day EMA / rising trend-line from April
Momentum oscillators have rolled over: RSI slips below 55, MACD prints a bearish crossover on the four-hour chart. Yet the medium-term up-trend remains intact above 1.3600. Bulls will defend that zone aggressively ahead of NFP risk.
Event Risk Dashboard (Asia/Karachi Time)
Date Time (PKT) Release Consensus Prior
Wed 2 Jul 17:15 US ADP Employment (Jun) 95 k 37 k
Wed 2 Jul 19:00 U.S. Factory Orders (May) 0.2 % 0.0 %
Thu 3 Jul 17:30 U.S. Non-Farm Payrolls (Jun) 190 k 186 k
Thu 3 Jul 17:30 U.S. Unemployment Rate (Jun) 3.9 % 3.9 %
Fri 4 Jul 14:30 U.K. Construction PMI (Jun) 50.0 51.2
Note: U.S. markets close on Friday for Independence Day; liquidity may thin after NFP.
Beyond the Data: Politics & Fiscal Clouds
Sterling’s outlook is complicated by U.S. fiscal angst. The Republican-led Senate just cleared President Trump’s tax-and-spending bill, projected to add $3.3 tn to debt. Moody’s downgrade in May still looms. Analysts at National Australia Bank warn that ballooning issuance could pressure Treasuries and paradoxically undermine the dollar medium-term.
Trade policy is another flashpoint: the July 9 tariff deadline on auto imports and a tentative U.S.–India deal inject headline risk. If tariff threats escalate, safe-havens may attract flows, but for now the greenback is favoured by yield-carry and labour resilience.
Scenario Analysis
Scenario Probability GBPUSD Reaction
Hot ADP/NFP (> 250 k) 35 % Break < 1.3650, aim 1.3580
In-line (~190 k) 45 % Choppy 1.3650-1.3760 range
Soft (< 120 k) 20 % Rebound to retest 1.3800+
Strategic Takeaways for Pound Traders
1. Mind the data cadence: ADP often overshoots NFP; a hot print could spike yields but fade if Friday disappoints.
2. Watch BoE commentary: Any hint that August easing is not a done deal could reignite sterling bids.
3. Technical guardrails: 1.3580 remains pivotal; a daily close below flips the structure bearish.
4. Volatility play: Long-vol via options may pay off given back-to-back U.S. labour releases amid policy uncertainty.
Conclusion Pound Retreats from 3½-Year Highs as Strong US.
The pound pullback is less a collapse than a reset. A resilient U.S. labour market and fresh BoE-driven rate-cut talk have restored the dollar’s mojo, but underlying UK inflation still runs above target and fiscal stimulus from a new UK budget (due September) could re-energise sterling later this year. Near-term, however, the path of least resistance for Pound points lower unless US jobs data undershoot or Bailey pushes back against Taylor’s aggressive easing narrative.
Disclaimer: This blog is for informational purposes only and does not constitute financial advice. Always conduct your own research and consult a professional advisor before making investment decisions.
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