Payrolls And Iran War Key USD Risks

The Pound US Dollar (GBP/USD) exchange rate wavered through last week’s session amid UK political jitters and US trade policy uncertainty.

DAILY RECAP:

The Pound (GBP) came under sustained pressure last week amid renewed UK political uncertainty.

Attention was firmly on the Gorton and Denton by-election in Greater Manchester, where the Green Party secured a convincing victory. Labour, which had held the seat with a sizeable majority in 2024, slipped to third place.

The scale of the upset rattled markets and reignited debate over the future of Keir Starmer’s premiership.

There was, however, a modest counterbalance to the political jitters, thanks to remarks from Bank of England (BoE) Governor Andrew Bailey, in which he suggested March’s policy decision ‘genuinely remains an open question,’ tempering expectations that a rate cut is a foregone conclusion.

Trade in the US Dollar (USD) was also mixed last week, as uncertainty surrounding US President Donald Trump’s newly announced global tariff measures injected fresh volatility into currency markets.

Markets were further unnerved as Trump doubled down on his sweeping new global tariffs at his State of the Union address, claiming that they could be used to replace income tax in the future.

USD exchange rates then remained volatile through the latter half of the session, as repeated swings in broader market sentiment led to choppy demand for the safe-haven currency.

Near-Term GBP/USD Forecast: US Payrolls in Focus

Turning to this week’s session, the latest US non-farm payroll figures will undoubtedly act as the primary catalyst for the Pound to US Dollar exchange rate.

Expect to see the US Dollar falter if February’s figures show the labour market cooling again after January’s surprisingly strong employment growth, as it is likely to temper recent hawkish Federal Reserve expectations.

Also of note to USD investors will be the latest ISM PMIs, which may underpin the ‘Greenback’ through the first half of the week if they show US private sector growth remained robust last month.

Meanwhile, in the UK the focus will be on Chancellor Rachel Reeves’s Spring Statement. While the event is expected to be relatively restrained in terms of new policy measures, updated projections from the Office for Budget Responsibility (OBR) could shape sentiment.

A more optimistic set of forecasts may help steady Sterling, but any downgrade to the UK’s outlook risks compounding the currency’s recent vulnerability.