- GBP/USD holds steady near 1.3465 in Thursday’s early European session.
- Traders prefer to wait on the sidelines ahead of the key US employment data on Friday.
- A cautious tone surrounding the BoE policy outlook could support the Pound Sterling.
The GBP/USD pair trades on a flat note around 1.3465 during the early European trading hours on Thursday. Markets turn cautious as traders await the upcoming key US economic data this week. The weekly US Initial Jobless Claims report is due later in the day ahead of the highly anticipated Nonfarm Payrolls (NFP) reading.
The US jobs data for December will be in the spotlight on Friday, as it might offer cues about the interest rate path. The US NFP is expected to rise by 60,000 in December. Meanwhile, the Unemployment Rate is estimated to tick lower to 4.5% in December from 4.6% in November. If the reports show stronger-than-expected outcomes, this could weigh on expectations for further US Federal Reserve (Fed) easing, which might lift the Greenback against the Pound Sterling (GBP).
Nonetheless, a dovish stance from the Fed officials could undermine the USD and act as a tailwind for the major pair. Fed Governor Stephen Miran, whose term at the US central bank ends later this month, said on Tuesday that aggressive US interest rate cuts are needed this year to keep the economy moving forward. Additionally, Minneapolis Fed President Neel Kashkari stated that he sees a risk that the jobless rate could “pop” higher.
The Bank of England (BoE) is expected to follow a gradual monetary easing path in 2026 as inflation is well above the central bank’s 2% target. This, in turn, could provide some support to the Cable. Financial markets expect the UK central bank to deliver at least one rate reduction in the first half of the year and are pricing in nearly a 50% odds of a second cut before the year-end, according to Reuters.
