Steady Pound Eyes Modest Weekly Gains Ahead of U.S. Employment Data

The pound remained steady on Thursday, with potential modest weekly gains against the dollar, in anticipation of U.S. employment data. With a stable euro and no imminent central bank rate cuts, market focus is on upcoming economic indicators that could influence currency movements in the near future.

The pound maintained its position on Thursday, setting the stage for modest weekly gains against the dollar ahead of the release of U.S. employment data. This data is expected to influence currency markets in the coming weeks and months.

Meanwhile, the euro aimed for its first weekly rise since early August, gaining 0.1% after hitting a one-month low against the pound last week. Sterling was last recorded at $1.3154, marking a 0.2% weekly increase, though it remains below last week's two-year high of $1.3269. Against the euro, the pound held steady at 84.26 pence. With the Bank of England's monetary policy meeting two weeks away, the derivatives market shows a low likelihood of a rate cut this month, although a quarter-point cut is priced in for November.

The BoE, which was the first major central bank to raise rates in 2021, is expected to be among the slowest to lower them, lending support to the pound this year. BoE economist Huw Pill, who opposed a rate cut in August, is scheduled to speak in Brussels later on Thursday, with markets keenly watching for any hints at monetary policy shifts.

ING strategist Chris Turner noted that any signs of increased confidence in the disinflation process could impact the pound, which has been more volatile compared to the euro. Despite this, U.S. monthly employment data set for release on Friday may keep overall currency market activity stable for now.

Reuters economists forecast an increase of 160,000 in U.S. nonfarm payrolls for August, up from July's 114,000. Markets are factoring in around 100 basis points worth of rate cuts from the Federal Reserve for the rest of the year, and Friday's data could determine whether the Fed opts for a quarter-point or a more substantial half-point cut next week.

(With inputs from agencies.)