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Pound to Dollar Forecast: Damage to GBP "Has Been Done"

July 4, 2025 - Written by Ben Hughes

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Choppy Trading after US Jobs Data: GBP/USD Rebounds from 1-Week Lows but Pound Confidence Fragile



The Pound rallied in early Europe on Thursday, but the Pound to Dollar (GBP/USD) exchange rate stalled around 1.3675 and there was a fresh slide after the US jobs data with a test of support below 1.3600 before a recovery to 1.3635.

According to Scotiabank; “We continue to highlight the importance of the 50 day MA as a critical source of medium-term support, and see near-term support closer to the 1.3600/1.3620 area.”

US employment data recorded an increase in non-farm payrolls of 147,000 for June compared with consensus forecasts of around 110,000.

There was, however, a notably slower rate of growth in private-sector jobs with a 73,000 jump in government payrolls.

The unemployment rate edged lower to 4.1% from 4.2% and below market expectations of 4.3%.

Following the stronger-than-expected data, markets ruled out the possibility of a rate cut at the July Federal Reserve meeting.


Spartan Capital Securities Chief Market Economist Peter Cardillo commented; “That takes us back to a September rate cut. On the other hand, if inflation should pop up from the tariffs, then they would probably go even further and wait for December. But things staying the way they are now, I think we’ll get a rate cut in September. But I certainly rule out July.”

Markets will continue to debate the underlying dollar outlook.

According to Scotiabank; “The broader dollar mood appears to be shifting a little after the six successive months of decline seen through H1. Some consolidation is possible but we do not anticipate any major recovery at this point.

It added; “DXY price action has slipped into a short-term consolidation pattern but it is one (a bear flag) that hints at weakness resuming shortly.”

The UK bond market posted net gains early on Thursday as market jitters faded with the 10-year yield close to 4.50%. There was, however, renewed selling later in the session with the yield around 4.57%.

Scotiabank commented; “The situation appears to have settled – for now – and markets are breathing a sigh of relief at the government’s renewed commitment to Reeves.”

Deutsche Bank remained cautious; "The immediate issue is that the government left a very narrow margin in March against their fiscal rules they set themselves."


It added; "So unless we got a big burst of growth before the budget, then the government would need to announce further tax rises or spending cuts if they still want to meet the fiscal rules."

MUFG commented; “The looming prospect of tax hikes has the potential to act as a dampener on growth in the UK if businesses and households curtail spending in anticipation of measures set to be announced in the autumn.”

It added; “Unless confidence is quickly restored the pound will continue to trade on an even weaker footing than we had expected.”

Commerzbank considers the government will find it difficult to restore confidence; “Although Starmer repeatedly emphasized afterwards that he fully backed his finance minister, the damage has been done. The market can no longer be sure that budgetary discipline will really be maintained in the UK.”

It added; “It is irrelevant whether Reeves can continue, or whether and, if so, who Stamer will choose as her successor - the damage to the pound and long-term interest rates has been done."
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