Pound Sterling Forecast: Strong Payrolls Put 1.35 Support Under Pressure

Modified: Sunday, 6 September 2026 23:01 BST - Written by David Woodsmith

STORY LINK Pound Sterling Forecast: Strong Payrolls Put 1.35 Support Under Pressure

The Pound to Dollar (GBP/USD) exchange rate remained close to the 1.3500 area at the end of the week after stronger-than-expected US jobs data revived expectations that the Federal Reserve could raise interest rates in September.

GBP/USD had dipped to four-week lows around 1.3470 earlier in the week before recovering above 1.3500 as more dovish comments from Federal Reserve Governor Christopher Waller temporarily weakened the Dollar.

Scotiabank still sees significant hope for Sterling bulls; “Short-term price action suggests important support at/ just below 1.3500, with additional support expected closer to 1.3450. The medium-term trend from June remains bullish however.”

The Dollar had initially been hampered by a sharp rise in the Yen and Waller’s comments that he would support holding rates steady in September if August inflation data extends recent progress.

Those expectations shifted again on Friday after the US labour-market report surprised strongly on the upside.

Strong Payrolls Push Fed Hike Odds Higher

US non-farm payrolls increased by 162,000 in August, comfortably above consensus forecasts for an increase of around 55,000.

The unemployment rate held at 4.1%, while labour-force participation increased.

The report suggested that the US labour market remains significantly more resilient than the earlier ADP figures had implied.

Private payroll processor ADP had reported an increase of only 38,000 jobs for August, below expectations around 48,000.

According to ADP; “Private employers posted their slowest pace of job creation since January. Manufacturing, professional services, and information shed jobs. Education and health care, construction, and leisure and hospitality all showed solid hiring.”

The official payroll figures therefore came as a significant upside surprise and prompted markets to increase the implied probability of a September Fed rate hike to around 60%.

Bank of America had commented ahead of the report; “A significantly weaker report could lower hike odds, but CPI remains the key release for determining whether the Fed follows through. We hold our call for Sept hike.”

The strong jobs number strengthens that case, although next week’s inflation data remains crucial.

Energy and Bond Markets Remain Important

Energy prices and global bond markets will also remain key influences on both Sterling and the Dollar.

Brent crude remains elevated close to recent six-week highs, while UK gas prices are near multi-year highs.

Higher energy costs increase inflation risks and strengthen the argument for tighter monetary policy on both sides of the Atlantic.

ING had commented; “We retain a preference for the upside in the dollar, as front-end rates and higher energy prices both point up.”

The bank added; “The main risk remains that higher back-end yields can prompt more interventionism by the Treasury and a revamp of the debasement trade.”

Long-term bond yields eased from their recent peaks during the second half of the week, although underlying concerns over fiscal policy and inflation remain.

For GBP/USD, the 1.3500 area remains the immediate technical battleground.

A sustained break below 1.3500 would expose support around 1.3450, while a recovery above 1.3550 would ease the immediate downside pressure.

The next major catalyst will be US inflation data, which will help determine whether the Federal Reserve follows through with a September rate hike.

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TAGS: Pound Dollar Forecasts