FX Market Update: US Jobs Data in Focus as Dollar Strength and Sterling Outlook Drive Currency Markets

Key Highlight

• Sterling remained relatively resilient despite losing ground to the US dollar. Falling UK 10-year gilt yields helped support the pound by easing pressure on the Bank of England, although a stronger US dollar pushed GBP/USD lower.

• Markets are now focused on US economic data. Today's US trade balance, JOLTS job openings and factory orders are expected to provide important clues ahead of Friday's Non-Farm Payrolls report, which is likely to be the key driver for currency markets this week.

• Japan's record currency intervention continues to influence markets. Reports suggest Japan spent around $34 billion supporting the yen, while lower oil prices improved overall market sentiment and weighed on commodity linked currencies.

Market Recap

The US dollar recovered from a one month low, with GBP/USD falling 0.40% to 1.3428, reversing much of the weakness seen following last week's yen intervention.

The Japanese yen strengthened significantly after reports of record intervention by Japanese authorities. GBP/JPY declined 0.65% to 210.79, making it the largest move across the G10 currencies during the session.

The Norwegian krone weakened after Brent crude oil dropped more than 7% to around $83 per barrel, following reports that President Trump had cancelled a planned strike on Iran. As a result, GBP/NOK gained 0.30%, making it the only major sterling cross to rise on the day.

Sterling also found some support from the UK bond market, with 10-year gilt yields falling by 10 basis points, their largest decline in seven weeks. Lower borrowing costs reduced expectations of further Bank of England tightening and helped offset some of the broader US dollar strength.

Market Overview

Attention now turns to today's US economic releases, which are expected to shape market expectations before Friday's closely watched employment report. Stronger than expected figures would reinforce expectations that the Federal Reserve will keep interest rates higher for longer, supporting the US dollar. Weaker data could have the opposite effect and allow recent sterling gains to resume.

Against the euro, the US dollar continues to hold a modest advantage in both the near and medium term, with 60% conviction. Although eurozone inflation remains elevated, keeping the European Central Bank cautious about cutting rates, the euro is facing additional pressure from its increasing use as a funding currency for global carry trades. For businesses exchanging €250,000, a move towards resistance would increase costs for euro buyers by around $2,775, while a move towards support could reduce costs by approximately $4,500.

For GBP/USD, the near term outlook continues to favour US dollar strength with 60% conviction, while the medium term view is more balanced at 40% conviction. Today's US data will be critical in determining whether the recent dollar recovery gathers further momentum. For businesses converting £250,000, a move towards support would increase costs for dollar buyers by approximately £1,631, while a move towards resistance would reduce costs by around £1,362.

The outlook for GBP/EUR remains finely balanced. The near term slightly favours euro strength with 45% conviction, while the medium-term view is evenly split at 50% conviction. The direction of inflation in the UK and eurozone, along with future central bank decisions, is expected to determine the next meaningful move. For transactions worth £250,000, a move towards support would increase costs for euro buyers by around £723, while a rise towards resistance would reduce costs by approximately £2,360.

Businesses with exposure to the Japanese yen should remain alert, as further intervention from Japanese authorities remains a possibility. Yesterday's move in GBP/JPY meant yen buyers paid approximately £1,620 more per £250,000, while sellers benefited by the same amount.

Bottom Line

Markets remain firmly focused on US economic data, but today's releases are primarily setting the stage for Friday's Non Farm Payrolls report, which is expected to be the week's defining event. A strong set of employment figures would likely extend the US dollar's recovery, while weaker data could see recent dollar weakness return. Businesses with upcoming international payments should continue to monitor these developments closely, as increased volatility could create opportunities to secure more favourable exchange rates.

4th August 2026

How We Can Help...

Our team are here to help you get more from your money when making international payments. We will work with you to understand your payment needs and offer guidance on the best options available to you.

Get in Touch!

P: 07441 910 897

E: FX-Admin@frank-exchange.com

This document has been prepared solely for information and is not intended as an Inducement concerning the purchase or sale of any financial instrument. By its nature market analysis represents the personal view of the author and no warranty can be, or is, offered as to the accuracy of any such analysis, or that predictions provided in any such analysis will prove to be correct. Should you rely on any analysis, information, or report provided as part of the Service it does so entirely at its own risk, and Frank eXchange Limited accepts no responsibility or liability for any loss or damage you may suffer as a result.  Information and opinions have been obtained from sources believed to be reliable, but no representation is made as to their accuracy. No copy of this document can be taken without prior written permission.