GBP/USD + GBP/EUR Market Update

Sterling and EUR/USD Consolidate Pre-NFP as Soft ADP Deepens Dollar Weakness; US Jobless Claims and UK Construction PMI the Day's Pivots, Thursday, 06 August 2026

GBP/USD: 1.3460 | GBP/EUR: 1.1660 | EUR/USD: 1.1544

Sterling enters Thursday's session holding Wednesday's gains, supported by a combination of continuing US-Iran diplomacy optimism, falling oil prices and a labour market narrative that is increasingly weighing on the dollar. ADP reported on Wednesday that private sector employers added just 44,000 jobs in July, the weakest monthly total of the year and a sharp pullback from June's revised figure of 95,000. With the consensus among Dow Jones-polled economists calling for 83,000 jobs in Friday's official count, with the jobless rate unchanged at 4.2%, the ADP miss has set a cautious tone for the dollar into the weekend. Today's calendar is light on UK data, leaving GBP/USD and GBP/EUR to take their cue from the US claims print and any further Hormuz diplomacy headlines.

Overnight & Market Tone:

GBP/USD rose to 1.3467 on 5 August, up 0.11% from the prior session, and our database shows the pair consolidating at 1.3460 in early London trade. The euro strengthened toward $1.155, its highest level since 16 June, as improving risk sentiment lifted demand for the single currency amid growing optimism that the US and Iran could reach a deal to end their five-month conflict and reopen the Strait of Hormuz. UK 10-year gilt yields fell below 4.9%, reaching their lowest level since 10 July, as a sharp decline in oil prices eased inflation concerns, with crude dropping about 10% this week on Hormuz diplomacy hopes. Risk appetite is broadly constructive: Next surged around 7% after raising its full-year profit guidance, while Glencore gained more than 4% after reporting an 86% year-on-year increase in adjusted profit.

UK Data & Bank of England:

There are no tier-one UK macro releases today. The S&P Global/CIPS UK Construction PMI for July is due at 09.30am and will be watched for any sign of a recovery from the sector's earlier-year weakness; the index fell to 44.5 in February, contrasting with expectations of a modest improvement to 47. The Lloyds Bank House Price Index for July is also scheduled this morning. On the monetary policy front, the MPC voted 6-3 at its meeting ending 29 July to maintain Bank Rate at 3.75%, with three members voting to increase Bank Rate by 25 basis points to 4.00%. The Bank's central projection showed CPI inflation peaking at around 3.2% in Q4 2026, with the MPC noting that "risks to the inflation outlook are tilted to the upside." Lower oil prices have since eased concerns over renewed inflationary pressures, reinforcing expectations that the Bank of England will take a gradual approach to policy tightening; Governor Bailey downplayed the need for additional rate hikes, saying the disinflation process remains on track. The next scheduled MPC meeting result will be announced on 17 September. OIS pricing implies markets have reduced bets on a near-term hike following Bailey's press conference pushback, though the 6-3 vote split keeps a September move alive as a tail risk.

European Backdrop & EUR/USD:

The euro was also underpinned by stronger-than-expected eurozone economic data, with the eurozone economy growing 0.4% in Q2, twice the pace forecast and the strongest expansion since early 2025; annual inflation accelerated to 2.9% in July, with both core and services inflation also picking up. That combination of firmer growth and stickier inflation has reinforced a cautious ECB posture. Markets now fully price in just one additional ECB rate hike by year-end, with around a 40% chance of a second; the ECB raised rates in June but left policy unchanged at its latest meeting. Eurozone inflation fell to 2.8% in June from 3.2% in May, but the July rebound to 2.9% has complicated the picture, removing the case for the ECB to stand pat indefinitely. The ECB deposit rate currently stands at 2.25% following the June hike, leaving a substantial gap versus Bank Rate at 3.75%.

For EUR/USD specifically, the pair has benefited from a convergence of tailwinds this week: a weaker dollar narrative driven by soft US labour data, falling energy prices reducing eurozone stagflation risk, and Q2 GDP outperformance. The base case points to gradual euro strength through 2026, driven by the Fed continuing to hold whilst the ECB moves cautiously; the rate differential has narrowed from over 225bp to approximately 162bp, and further compression favours the euro. The ECB's reaction function is more cautious about cutting too far given still-sticky services inflation in parts of the bloc; a shallower ECB easing cycle against a steeper Fed cycle is the textbook recipe for EUR/USD upside. Technical support for EUR/USD sits at 1.1476 (March 2026 swing low) and 1.1400 (23.6% Fibonacci retracement of the 2022-2026 rally), while the pair's current position near 1.1544 keeps it within striking distance of the 1.1837 September 2025 high. For treasurers with direct USD/EUR exposures, EUR/USD is the cleanest expression of the Fed-ECB differential trade this week, and Friday's NFP is the primary repricing event.

US Backdrop:

Private businesses in the US added 44,000 jobs in July 2026, the least in six months, following a downwardly revised 95,000 gain in June and below forecasts of 70,000, according to ADP. The dollar heads into Friday's jobs report with traders juggling mixed labour signals and shifting Fed expectations, with recent employment indicators pointing in different directions and putting even more focus on what July's NFP numbers might mean for the Fed's September decision. The Federal Reserve is currently holding rates at 3.50%-3.75% and is data-dependent in its assessment of when to resume cutting. Today's US weekly jobless claims (consensus near 200,000-205,000, per Quantum Trading) and preliminary Q2 nonfarm productivity data are the session's primary US catalysts ahead of tomorrow's employment report.

Technical Picture:

GBP/USD: Resistance at 1.3490 (Wednesday session high), 1.3530 (mid-July peak) and 1.3600 (psychological). Support at 1.3430 (Tuesday low), 1.3390 (50-day moving average area) and 1.3300 (round number).
GBP/EUR: Resistance at 1.1690 (intraday high this week), 1.1738 (one-year high recorded in late July, per Cambridge Currencies) and 1.1800 (psychological). Support at 1.1620 (Wednesday low), 1.1580 and 1.1520.
EUR/USD: Resistance at 1.1570 (Wednesday high), 1.1600 (round number) and 1.1837 (September 2025 high). Support at 1.1476 (March 2026 swing low), 1.1400 (Fibonacci retracement) and 1.1350.
Outlook: GBP/USD is trading near its 8-day and 21-day moving averages, and above its 50-day and 100-day EMAs, suggesting the near-term trend remains constructive; a clean break above 1.3490 would open a test of 1.3530, while EUR/USD needs to clear 1.1570 convincingly to extend the rally toward the September 2025 high.

Today's Calendar:

The 13.30 BST US jobless claims print is the session's primary FX catalyst: a reading materially above 205,000 would amplify the ADP miss and push GBP/USD and EUR/USD higher into Friday's NFP, whereas a sub-195,000 print could trigger a partial dollar recovery and cap both pairs ahead of the weekend.

Outlook:

The path of least resistance for GBP/USD and EUR/USD remains modestly higher so long as the dollar's labour-market narrative stays soft and Hormuz diplomacy holds, with Friday's NFP (consensus 83,000, per CNBC) the decisive event that will either confirm or sharply reverse this week's dollar weakness. Treasurers with near-term USD payables may wish to consider layering hedges at current levels given the binary risk around Friday's print; a materially stronger NFP could see GBP/USD retrace toward 1.3390 and EUR/USD back toward 1.1476, while a second consecutive miss would likely push both pairs to fresh multi-week highs.

This commentary is provided for informational purposes only and should not be construed as investment, legal, or tax advice. Past performance is not indicative of future results. Please consult with qualified professionals before making any financial decisions.