Pound Strengthens Slightly Ahead of NFP
The pound sterling strengthened modestly against the US dollar on Thursday (June 4) in the Asian session, with GBP/USD holding above 1.3400 after briefly approaching a weekly low. This strengthening was largely driven by dollar weakness as demand for safe-haven assets waned, rather than by any domestic fundamentals in the UK.
The dollar weakened after Israel and Lebanon announced a conditional ceasefire agreement in a joint statement with the US. This development eased concerns about a wider regional conflict, curbing the dollar's rally that had begun the week and providing room for a rebound in riskier currencies, including the pound.
However, the market was hesitant to push GBP/USD higher as tensions in the Gulf remained active. The US reported successfully thwarting a series of Iranian missiles and drones targeting Kuwait and Bahrain and conducting a "self-defense" attack on Qeshm Island, while Iran reportedly retaliated by targeting a US military base in Bahrain. The deadlock in US-Iran negotiations over Tehran's nuclear program and the status of the Strait of Hormuz keeps the risk of escalation high, so the dollar still has support from geopolitical uncertainty.
From a market transmission perspective, the conflict that keeps energy prices high risks prolonging inflationary pressures, prompting the market to maintain expectations of tighter US monetary policy. The Fed's hawkish outlook—including bets on a rate hike in 2026—tends to support the dollar and limit GBP/USD's upside, although the dollar weakened briefly due to sentiment factors.
Market participants also tend to hold positions ahead of the release of US Nonfarm Payrolls (NFP) data on Friday. This employment data has the potential to change expectations about the Fed's interest rate path, thus triggering volatility in the dollar and major pairs, including GBP/USD.
With the combination of an unverified ceasefire on the ground and the market awaiting the NFP, the short-term bias of GBP/USD appears fragile: any rally could be quickly halted, while higher levels risk triggering renewed selling if the dollar strengthens again. (asd)
Source: Newsmaker.id
