GBP/USD Holds Steady Above 1.2700 Amid Muted USD Movement

The GBP/USD pair maintains a modest upward bias for the third consecutive day, trading steadily above the 1.2700 level during Thursday’s Asian session. However, the pair lacks strong bullish momentum and remains below Monday’s weekly high.

The US Dollar (USD) continues its range-bound movement as traders adopt a cautious approach ahead of Friday’s US Nonfarm Payrolls (NFP) report. This indecision offers some support to the GBP/USD pair. However, expectations of a less dovish Federal Reserve (Fed) stance have driven a slight uptick in US Treasury yields, lending some strength to the USD.

Market participants seem increasingly convinced that US inflation could rise due to expansionary policies and trade measures proposed by President-elect Donald Trump. Additionally, recent comments from Federal Reserve Chair Jerome Powell and other Federal Open Market Committee (FOMC) members indicate a cautious approach to future rate cuts, further boosting US Treasury yields and the Greenback.

Geopolitical concerns, including the escalating Russia-Ukraine conflict and trade tensions, continue to support the safe-haven USD. Meanwhile, the British Pound (GBP) faces headwinds as traders anticipate Bank of England (BoE) Governor Andrew Bailey’s potential signal for four interest rate cuts in 2025. These factors limit the upside for GBP/USD and call for cautious trading.

Looking ahead, the UK Construction PMI release will be closely monitored for short-term direction, followed by the US Initial Jobless Claims data during the early North American session. However, market participants remain primarily focused on Friday’s crucial US employment report, which will shape expectations for the Fed’s next policy moves.