GBP Tests 1.3500 as USD Struggles with NFP Shock

The British Pound (GBP) tested the 1.3500 level on Monday, but struggled to hold above it. The pair's momentum was helped by weak US employment figures released last Friday, which weighed heavily on the US Dollar (USD).

According to the Nonfarm Payrolls (NFP) report, the US economy lost 23K jobs in July, fueling concerns about a slowdown in the US labor market and reducing expectations of monetary tightening by the Federal Reserve (Fed). The chances of a Fed interest-rate hike in September have now dropped to less than 45%, down from around 67% a week earlier.

The UK's GDP growth is expected to expand by 0.4% in the second quarter, but strategists at Brown Brothers Harriman expect momentum to cool in the coming quarter. The Bank of England (BoE) projects a softer print of 0.3% q/q as lower household real income growth and tighter financial conditions weigh on domestic demand activity.