GBP/USD held a narrow range on Wednesday as traders weighed hawkish remarks from new Fed Chair Kevin Warsh against dovish signals from the Bank of England at the ECB’s Sintra forum. Sterling firmed anyway, and Thursday’s US payrolls report looms as the next test.
The Pound to Dollar rate traded around $1.3270 on Wednesday, little changed on the day, as investors digested competing central-bank messages delivered on the same panel at the European Central Bank’s annual Sintra Forum. The US Dollar ticked higher, yet Sterling firmed too — leaving the pair pinned in a tight band.
Warsh strikes a hawkish tone
New Federal Reserve Chair Kevin Warsh, speaking alongside ECB President Christine Lagarde and BoE Governor Andrew Bailey, said the bank is unhappy that inflation is running above its 2% target. He also suggested US inflation expectations have fallen in recent weeks, but the overall message underpinned bets the Fed could raise interest rates again by the end of summer.
Warsh also reiterated that the Federal Reserve is an independent central bank. That eased fears that President Trump’s latest pick for the Fed might yield to his calls for rate cuts, and it helped lift the Dollar.
Sterling firms despite dovish Bailey
Sterling rose even though Bailey struck a broadly dovish note, saying rate cuts are currently ‘off the table’ amid a slowing economy and softening labour market. Yet he suggested the question would be revisited in July — a hint hawkish enough to support the Pound through the European session.
Broader momentum has favoured Sterling for much of the week. GBP/USD had bottomed near 1.3150 in late June before clawing back toward the 1.3300 area. That rebound was helped by hopes that likely next leader Andy Burnham will stick to existing fiscal rules despite the leadership change.
Payrolls in focus
The next catalyst is Thursday’s US non-farm payrolls report. Consensus estimates point to a moderation from 172,000 to 110,000 jobs last month, though recent releases have generally outpaced expectations. For the Pound, attention then turns to Burnham’s likely cabinet — and whether his pick for Chancellor signals more borrowing, which could weigh on Sterling if gilt yields jump.
Sources: Exchange Rates UK, FXStreet, FXStreet
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