GBP/USD holds below 1.3200 ahead of US NFP data

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GBP/USD trades in negative territory around 1.3195 in Friday’s Asian session.
BoE is likely to cut the bank rate to 4.0% from 4.25% next week.
Trump kept the minimum global tariff rates at 10%.

The GBP/USD pair extends the decline to near 1.3195 during the Asian trading hours on Friday. The Pound Sterling (GBP) edges lower against the Greenback due to rising expectations of the Bank of England (BoE) rate cut next week. Investors brace for the US July employment data, including Nonfarm Payrolls (NFP) and the Unemployment Rate, which will be published later on Friday.

The Cable remains under selling pressure amid escalating price pressures and cooling labor market conditions. BoE’s policymakers cut its benchmark rate by 25 basis points (bps) at the May meeting, and analysts expect a similar outcome on August 7. Money markets indicate there is an 89% odds that the BoE will lower borrowing costs in August, according to Reuters.

On the other hand, US President Donald Trump imposed new tariff rates on dozens of trade partners, which provides some support to the US Dollar (USD) and creates a headwind for the major pair. The White House late Thursday announced that Trump will set a baseline tariff rate of 10%. Additionally, Trump has signed an executive order increasing the tariff on Canada from 25% to 35%, effective on August 1, 2025. Trump extended Mexico’s current tariff rates for 90 days to allow more time for trade negotiations.

All eyes will be on the US employment report later on Friday. Economists forecast the employment growth slowed to 110,000 new jobs in July, while the Unemployment Rate is expected to rise to 4.2% during the same period. In case of a weaker-than-expected outcome, this could undermine the USD against the GBP in the near term.

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.