GBP/USD + GBP/EUR Market Update

NFP Day Decides the Fed's Hand: GBP/USD Steadies at 1.3534 and EUR/USD Firms to 1.1623 as Waller Trims Hike Odds Ahead of the Last Jobs Print Before Three Central-Bank Decisions, Friday, 04 September 2026

GBP/USD: 1.3534 | GBP/EUR: 1.1644 | EUR/USD: 1.1623

All three pairs have stabilised overnight after Thursday's modest risk recovery, with the 10-year US Treasury yield easing to around 4.74% from its 4.81% weekly high after Fed Governor Waller signalled conditional comfort with holding rates, offering some relief to rate-sensitive currencies. Waller's remarks pushed the implied September Fed hike probability down to roughly 54.6% on CME FedWatch, from the 66% peak seen on Monday following Chair Warsh's hawkish Jackson Hole address. The August NFP print at 13.30 London is today's dominant event and will set the tone for all three pairs into the weekend.

Overnight & Market Tone:

GBP/USD has recovered from Thursday's 1.3495 trough to trade near 1.3534, with an overnight range of approximately 1.3524-1.3543 as the dollar softened modestly on Waller's comments. UK equities closed higher on Thursday, with the FTSE 100 up 0.73%, supported by gains in mining and software stocks. The VIX eased to 14.32, suggesting risk sentiment has stabilised, while Brent crude held near $95.63 a barrel, keeping energy-driven inflation concerns alive across all three central-bank outlooks. GBP/EUR has edged up to 1.1644 from 1.1628 at Thursday's close, reflecting the dollar's modest retreat rather than any fresh sterling-specific catalyst.

UK Data & Bank of England:

Bank Rate stands at 3.75%, where it has been held since the MPC cut from 4.00% in December 2025. At the July meeting, the MPC held at 3.75%, though three of the nine committee members voted for an increase, a hawkish minority that has grown from two at the June meeting. A Reuters poll of economists conducted 13-18 August found that nearly 90% of those surveyed expect the MPC to leave rates unchanged at 3.75% for the rest of the year. The next scheduled decision is on 17 September 2026, with OIS markets currently pricing a move of approximately +7bp at that meeting, implying a roughly 28% probability of a 25bp hike and a 72% probability of a hold. Rate expectations have been reinforced by the latest British Retail Consortium report, which showed UK shop-price inflation accelerating to its highest level in two years. With no major UK data scheduled today, sterling's direction will be driven almost entirely by the NFP outcome and its implications for the Fed-BoE rate differential. The UK data calendar resumes next week with CPI on 16 September, the day before the MPC decision.

European Backdrop & EUR/USD:

The ECB raised its three key interest rates by 25 basis points at the June meeting, lifting the deposit facility rate to 2.25% with effect from 17 June 2026. Energy price pressures drove eurozone headline inflation back above 3% in August, with the flash HICP estimate rising to 3.3% from 2.9% in July, the highest since September 2024. Energy inflation accelerated to 14.3% from 10.3%, though core inflation dipped to 2.4% from 2.5%. Against that backdrop, traders have locked in expectations for the ECB to hike at its 10 September meeting, with market pricing putting a 98.9% probability on a 25bp increase to 2.50%, according to LSEG data. A Reuters poll of 65 economists surveyed unanimously favoured a 25bp hike to 2.50%. The September meeting also brings updated Eurosystem staff projections, and the ECB has stated that the war in the Middle East is generating inflation pressures and that the decision to raise rates is robust across a range of scenarios, with baseline headline inflation projected to average 3.0% in 2026.

For EUR/USD specifically, the pair has firmed from Thursday's 1.1586 low to 1.1623, sitting near the top of its recent 1.1575-1.1628 range. The move reflects a narrowing of the Fed-ECB rate differential as Waller's comments trimmed hike odds on the US side while ECB pricing remains near-certain for a move next week. With the war still raging and inflation at 3.3%, the ECB is expected to raise rates from 2.25% to 2.50% on 10 September, according to market pricing. A confirmed ECB hike would bring the deposit rate to 2.50%, compressing the gap against the Fed's current 3.50%-3.75% target range and providing a structural support for EUR/USD. The key risk to the upside for EUR/USD today is a soft NFP that further erodes Fed hike expectations; the key downside risk is a strong print that reasserts dollar demand ahead of the 16 September FOMC. The ECB's June projections revised eurozone growth down to 0.8% for 2026, reflecting a more pronounced impact of the conflict on commodity markets, real incomes and confidence, which caps how far EUR/USD can rally on ECB hawkishness alone.

US Backdrop:

Today's August nonfarm payrolls is the last major labour print before the FOMC meets on 15-16 September, a meeting that comes with a Summary of Economic Projections and a press conference from Chair Warsh, who has already signalled that inflation work is not done. Market consensus expects an addition of approximately 58,000 jobs with a 4.1% unemployment rate, following weak July figures. The ADP report showed the US private sector added only 38,000 jobs in August, below the market expectation of 47,000 and the smallest gain in seven months, pointing to downside risk for the headline. Chair Warsh has highlighted PCE inflation at 3.7% over 12 months and 4.1% over six months, well above the 2% target, as a key concern. A print below 40,000 would likely push hike odds below 50% and weaken the dollar materially; a print above 80,000 would reassert the hawkish narrative and reverse Thursday's gains in GBP/USD and EUR/USD.

Technical Picture:

GBP/USD: Resistance at 1.3560 (this week's intraday high), then 1.3600 and 1.3641 (22 August high). Support at 1.3495 (Thursday's low), 1.3484 (Thursday's close/prior session low), and 1.3450.
GBP/EUR: Resistance at 1.1660 (mid-week high), then 1.1673 (2 September high). Support at 1.1628 (Thursday's close), 1.1600, and 1.1580.
EUR/USD: Resistance at 1.1628 (Thursday's high), then 1.1650 and 1.1673. Support at 1.1580 (Thursday's low), 1.1575 (week's base), and 1.1540.
Outlook: All three pairs are consolidating within tight ranges ahead of NFP, with GBP/USD and EUR/USD biased modestly higher on the softer dollar tone but lacking conviction to break resistance without a clear miss in the payrolls data; a strong print would likely see GBP/USD retest 1.3484-1.3495 support and EUR/USD revisit 1.1575-1.1580.

Today's Calendar:

The 13.30 NFP release is the week's pivotal event: given the soft ADP print of 38,000 and the July payrolls shock of -23,000, any outcome materially above or below the 58,000 consensus will drive sharp repricing across all three pairs and directly condition the Fed's 16 September decision.

Outlook:

Heading into the weekend, the bias for GBP/USD and EUR/USD is cautiously higher if NFP disappoints, with GBP/USD targeting 1.3560-1.3580 and EUR/USD eyeing 1.1650, but a strong print would reassert the hawkish dollar narrative and push both pairs back toward their weekly lows ahead of a pivotal fortnight that includes the ECB on 10 September, the Fed on 16 September, and the BoE on 17 September. Treasurers with USD payables should consider using any post-NFP dollar weakness as a hedging opportunity rather than waiting for the three-way central-bank event risk to resolve.

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.