Pound Sterling Drifts Lower vs Euro and Dollar on Dovish BoE Bets, US Jobs

May 3, 2025 - Written by Tim Boyer

STORY LINK Pound Sterling Drifts Lower vs Euro and Dollar on Dovish BoE Bets, US Jobs

The US Dollar (USD) dipped lower against the Pound Sterling (GBP) and Euro (EUR) in early Europe on Friday, but regained ground after the latest US labour-market data did not indicate a sharp deterioration in the labour market.

The British Pound was also hampered by expectations that a Bank of England rate cut next week will be accompanied by more dovish guidance.

From highs just above 1.3320, the Pound to Dollar (GBP/USD) exchange rate retreated to 1.3270 before settling just below 1.3300. Key near-term support is close to 1.3250.

There were further gains for global equities during the day.

Scotiabank commented; “The broader tone is indicative of risk appetite, with notable gains across global equity indices and US equity futures.”

According to ING; “the FX confidence crisis is over – it’s now a matter of whether there is enough in the data and in US policies to justify a sustained rotation away from the dollar as a reserve asset beyond the short term. This will become clearer in the coming months; for now, the reality is one of a more resilient, less volatile dollar.”

The Pound to Euro (GBP/EUR) exchange rate retreated to around 1.1730. GBP/EUR needs to sustain a break above 1.1765 to boost the outlook.


US non-farm payrolls increased 177,000 for April compared with consensus forecasts of a round 140,000 while the March increase was revised down to 185,000 from 228,000 reported originally.

The unemployment rate held at 4.2%, in line with expectations and the labour-force survey reported a monthly employment increase of over 400,000.

Average earnings increased 0.2% on the month with the year-on-year increase holding at 3.8%.

MUFG commented; “A much stronger print would more likely be dismissed by the markets with the view that weaker jobs data are still coming.”

Importantly, the data will not provide the smoking gun needed to justify a near-term rate cut.

In this context, there are strong expectations that the Fed will hold rates steady in the week ahead.

According to ANZ; "Our view is that the FOMC needs time and more data to assess the impact of tariffs on inflation. As long as the labour market holds up, the FOMC will focus on inflation."


Lindsay Rosner at Goldman Sachs took a similar view; “In the here and now, solid labor market data provides the Fed with scope for patience.”

She added; “With the forward-looking outlook having deteriorated, however, today’s data feels somewhat backward looking and the risks remain that a weakening economy could see the Fed resume its easing cycle later in the year.”

Domestically, the Reform Party secured strong gains in the local elections and also won the Runcorn and Helsby by-election with a tiny majority.

The Conservatives have suffered notable losses, but the Labour Party has also lost considerable ground.

This will increase pressure for the government to adopt a more expansionary fiscal policy while relations with the EU will also be in focus.

George Vessey, lead FX and macro strategist at Convera commented; "The result underscores growing concerns within Labour about the rise of the populist right, with Reform making gains across England."

According to Danske Bank; "An investment environment characterised by elevated uncertainty, widening credit spreads and a positive correlation to a (U.S. dollar)-negative environment, in our view, favours a weaker (pound)."

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TAGS: Pound Sterling Forecasts