The British Pound (GBP) traded slightly lower against the US Dollar (USD) on Thursday, with the GBP/USD pair hovering around 1.3460 after retreating modestly from Wednesday’s high of 1.3486. Despite the minor pullback, the pair remained confined within a relatively narrow 100-pip trading range, as buyers struggled to push prices above the key 1.3500 resistance level while persistent US Dollar weakness continued to provide support near the 1.3400 region.

Sterling found support during the previous session following an upward revision to the UK S&P Global Services PMI for July, which signaled stronger-than-expected activity in the services sector. The currency also benefited from disappointing US labor market data, which increased doubts over the strength of Friday’s Nonfarm Payrolls (NFP) report and encouraged investors to further reduce expectations for additional Federal Reserve interest rate hikes.

Market analysts remain cautiously optimistic on the Pound’s outlook. Strategists at Scotiabank describe the technical picture as “neutral to bullish,” noting that last week’s advance in GBP/USD and improving momentum indicators suggest there is still room for additional gains. They believe a sustained move above the 1.3500 area could pave the way for a retest of the recent highs around 1.3555–1.3560, while identifying 1.3390–1.3400 as an important support zone that could attract buyers if the pair weakens.

The US Dollar continues to face headwinds as declining US Treasury yields and softer economic data reduce the likelihood of further monetary tightening by the Federal Reserve. Recent economic releases have failed to strengthen the case for higher interest rates, prompting traders to lower the probability of a September Fed rate hike to around 54%, down from 67% earlier in the week. This shift in expectations has weighed on the Greenback and helped limit downside pressure on the Pound.

Additional pressure on the US Dollar has come from concerns surrounding the Federal Reserve’s independence. Analysts at MUFG highlighted reports suggesting that President Donald Trump has held repeated discussions with Fed Chair Kevin Warsh, raising questions about potential political influence over monetary policy decisions. According to MUFG, such developments could undermine investor confidence in US financial assets and encourage increased hedging against the US Dollar, creating further downside risks for the currency in the months ahead.

With markets now awaiting Friday’s Nonfarm Payrolls report, investors are expected to remain cautious, as the employment data could significantly influence expectations for future Federal Reserve policy and determine the next major move in GBP/USD.

Trade Idea:

Consider buying GBP/USD above 1.3460, targeting 1.3520–1.3560, with a stop-loss below 1.3410, as weakening Fed tightening expectations continue to support Sterling against the US Dollar.