GBP/USD Price Forecast: Likely retest YTD low near 1.3140

The British Pound is up at around 1.3208 against the US Dollar ahead of the US NFP data for September.
Surging US Treasury Yields have strengthened the US Dollar.
BoE’s Mann criticizes the central bank for not taking an early action against Iran war outbreak.

The British Pound (GBP) trades 0.1% higher at around 1.3208 against the US Dollar (USD) during the Asian trading session on Friday. The GBP/USD pair as the US Dollar Index trades slightly lower to near 101.93 after posting a fresh over-a-year high at 102.20 on Thursday.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

The US Dollar is expected to trade cautiously as investors await the United States (US) Nonfarm Payrolls (NFP) data for September, which will be published at 12:30 GMT.

Analysts at OCBC flag “this week's US labour market report” as the key event risk for the Dollar, noting that Bloomberg consensus expects “nonfarm payrolls to rise by 90,000 in September, down from 162,000 in August, while the unemployment rate is forecast to remain unchanged at 4.1%.” They acknowledge that Federal Reserve (Fed) Chair Kevin Warsh has highlighted “the four-week average of initial jobless claims as a timely indicator of labour market conditions,” but stress that “payrolls remain the market's preferred measure of labour market health.”

OCBC points out that “recent claims data have continued to trend lower, suggesting labour market conditions remain firm,” and therefore “the risk of an upside payrolls surprise appears to be increasing.” In their view, “a stronger-than-expected employment report would likely reinforce expectations of further Fed tightening, keep Treasury yields elevated and provide additional support for the USD.”

The rally in the US Dollar Index is driven by surging United States (US) Treasury Yields, as elevated energy prices have boosted hawkish Fed expectations.

On the GBP front, Bank of England (BoE) member Catherine Mann, an outspoken hawk, has admitted that the central bank has made errors in assessing the consequences of energy supply shock, Reuters report. Her comments in a speech at the Nomura London Macro Forum on Thursday signaled that the central bank should has taken necessary action right at the Iran war outbreak to control inflation.

GBP/USD Technical Analysis

In the daily chart, GBP/USD trades at 1.3208, maintaining a bearish near-term bias as spot holds below the 20-period exponential moving average (EMA) at 1.3333. The pair continues to retreat away from that dynamic cap, and the Relative Strength Index (RSI) at 31.3 hovers just above oversold territory, hinting that while downside pressure persists, sellers may begin to slow rather than accelerate aggressively from current levels.

On the topside, immediate resistance is located at the 20-period EMA at 1.3333, which acts as the first hurdle for any corrective bounce and reinforces the broader bearish structure while price trades beneath it. Looking down, the Year-Till-Date (YTD) low at 1.3140 is the major support level.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Nonfarm Payrolls FAQs

What are Nonfarm Payrolls?

Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.

How does Nonfarm Payrolls influence the Federal Reserve monetary policy decisions?

The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.

How does Nonfarm Payrolls affect the US Dollar?

Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.

How does Nonfarm Payrolls affect Gold?

Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.

Sometimes Nonfarm Payrolls trigger an opposite reaction than what the market expects. Why is that?

Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.

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