GBP/USD + GBP/EUR Market Update

NFP Day: Dollar Poised for Sharp Repricing as GBP/USD Holds Above 1.3440 and EUR/USD Consolidates Near Seven-Week Highs, Friday, 07 August 2026

GBP/USD: 1.3448 | GBP/EUR: 1.1671 | EUR/USD: 1.1523

All three pairs enter Friday's session in tight pre-NFP ranges, with GBP/USD holding just above 1.3440 after a week shaped by a soft ADP print (44,000 vs 70,000 consensus, per Reuters) and persistent dollar weakness. Today's US July NFP report is scheduled at 12.30pm GMT (13.30 BST), and the dollar heads into the release with traders juggling mixed labour signals, shifting Fed expectations, and a fragile risk-sentiment backdrop, putting even more focus on what July's numbers might mean for the Fed's September decision. GBP/EUR has drifted marginally lower on the week, reflecting a broadly stable cross rather than any directional UK or eurozone catalyst.

Overnight & Market Tone:

GBP/USD fell to 1.3451 on 6 August, down 0.11% from the previous session, and has opened Friday in a narrow band around 1.3448, consistent with our database spot. GBP/EUR edged up to 1.1679 as of Thursday's close, compared with 1.1655 the session prior, a gain of 0.21%. Over the past seven days the GBP/EUR market rate has averaged 1.1675, with a high of 1.1687 and a low of 1.1655, illustrating the pair's tight consolidation. Risk sentiment is cautiously constructive: Iran and Oman have reportedly reached a deal on the Strait of Hormuz, though final details are still being worked out, while US equity futures pointed modestly higher on Thursday after the Dow closed at a record 54,407. Gilt yields remain elevated relative to early-2026 levels, consistent with the BoE's hawkish minority, and the FTSE 100 is expected to open broadly flat pending the NFP outcome.

UK Data & Bank of England:

There is no UK data of note today. The dominant domestic narrative remains the BoE's July meeting outcome. The Bank of England held Bank Rate at 3.75% on 30 July 2026, where it has stood since late 2025, with the MPC voting 6-3 to hold alongside a new Monetary Policy Report. The three dissenters, Megan Greene, Catherine Mann, and Huw Pill, each preferred a 0.25-point rise to 4.00%; that is one more hawkish dissent than June's 7-2 and two more than April's 8-1, meaning the minority pushing for higher rates has grown at three consecutive meetings. The Bank's central projection on 30 July showed CPI inflation peaking at around 3.2% in 2026 Q4, with the MPC noting that "risks to the inflation outlook are tilted to the upside." Market pricing implied by SONIA futures currently points to the base rate rising to around 4.2% by the second half of 2027, though the June 2026 survey median expected Bank Rate to hold at 3.75% through end-2026 before easing. The next MPC decision is on Thursday 17 September 2026, announced at 12.00pm UK time. The BoE is widely predicted to hold rates again at that meeting, though the growing hawkish minority means any upside surprise in UK inflation data between now and then could sharply reprice that expectation. The 150bp gap between Bank Rate (3.75%) and the ECB deposit rate (2.25%) continues to provide a structural underpinning for GBP/EUR, as noted by market forecasters.

European Backdrop & EUR/USD:

The ECB raised all three policy rates by 25 basis points on 11 June, its first increase since 2023 and the first move by any major central bank to fight stagflationary pressure from the US-Iran conflict, taking the deposit rate to 2.25%. The ECB left policy unchanged at its subsequent meeting, but stronger-than-expected eurozone data continued to support expectations that the Governing Council could raise interest rates again at its next meeting in September. The bloc's economy expanded 0.4% in the second quarter, twice the expected pace and the strongest growth since early 2025, while annual inflation accelerated to 2.9% in July, with both core and services inflation also strengthening. Markets assign a 70% to 79% probability to a 25 basis-point hike on 10 September taking the deposit rate to 2.50%, and following last week's GDP and inflation data, markets fully price the deposit rate reaching 2.75% by early 2027. The direction is now established across two consecutive tier-one releases: growth beating forecasts and core inflation firming in the same week, six weeks before a meeting that carries new projections.

For EUR/USD specifically, the pair has been trading near seven-week highs around 1.1523-1.1544 this week, driven primarily by dollar softness rather than outright euro strength. The ECB raised its deposit rate 25bp to 2.25% on 11 June while the Fed held at 3.50-3.75% on 17 June but signalled a likely 2026 hike, with nine of eighteen members projecting tightening. The Fed-ECB rate differential has narrowed dramatically, from roughly 3.25 percentage points in 2023 to approximately 1.50 percentage points today, and any further ECB tightening in September would compress it further, providing a structural tailwind for EUR/USD. The Fed hinted at a rate hike at its next meeting in September, which creates a two-sided risk for EUR/USD: a strong NFP today reinforces that hike probability and would likely push EUR/USD back toward 1.1450, while a weak print would reduce it and could see the pair test 1.1580-1.1600. Treasurers with direct EUR/USD exposures should note that the pair's near-term direction is almost entirely a function of today's US data and subsequent Fed pricing, with the ECB's own September decision a secondary but growing influence.

US Backdrop:

The Fed held its benchmark rate steady at a target range of 3.50% to 3.75% at the FOMC meeting held 28-29 July. Three members of the policymaking FOMC dissented, wanting to hike. As of 29 July, the CME FedWatch Tool showed markets pricing in a 61% probability of a quarter-point rate hike at the Fed's September meeting, though that probability has likely drifted lower following the soft ADP print this week. Today's BLS Employment Situation for July carries a consensus forecast of around 80,000 for non-farm payrolls, with the unemployment rate expected to hold at 4.2% and average earnings year-on-year at 3.5%, against a prior June print of just 57,000. Fed Chair Warsh is expected to speak at the Jackson Hole Economic Policy Symposium in August, which will be the next major opportunity for the Fed to shape September hike expectations after today's data.

Technical Picture:

GBP/USD: Resistance at 1.3480, then 1.3510 (weekly high) and 1.3560. Support at 1.3420, then 1.3380 and 1.3340.
GBP/EUR: Resistance at 1.1690, then 1.1720 and 1.1740 (recent one-year high area per market sources). Support at 1.1650, then 1.1620 and 1.1590.
EUR/USD: Resistance at 1.1550, then 1.1580 and 1.1620. Support at 1.1490, then 1.1450 and 1.1400.
Outlook: All three pairs are coiled in pre-NFP ranges and the technical picture is secondary to today's data; a clean break above GBP/USD 1.3480 or EUR/USD 1.1550 on a soft print would open meaningful upside, while a strong print risks a swift retest of GBP/USD 1.3380 and EUR/USD 1.1450 as September Fed hike pricing reasserts itself.

Today's Calendar:

The 13.30 BST non-farm payrolls release is the session's sole macro event of consequence; given the week's soft ADP data and the Fed's finely balanced September hike debate, even a modest beat or miss relative to the 80,000-85,000 consensus is likely to generate outsized moves across all three pairs.

Outlook:

The bias into the NFP print is modestly dollar-negative, given the ADP miss earlier this week and the easing of Hormuz tensions reducing the safe-haven premium, but the Fed's three hawkish dissenters and Chair Warsh's data-dependent stance mean a strong July payrolls number could rapidly reverse that dynamic and push GBP/USD back below 1.3400 and EUR/USD toward 1.1450. Treasurers with USD payables due in the coming weeks should consider whether today's volatility window offers a tactical opportunity to hedge, particularly given that the next major repricing event after today is Warsh's Jackson Hole address and the September FOMC meeting on 16 September.

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.