GBP/USD Falls Below 1.3600 as Dollar Strengthens on Low Jobless Claims
GBP/USD has fallen below 1.3600 after two consecutive losing sessions. The pair traded as low as 1.3579 on Thursday, down 0.12% from Wednesday's high of 1.3651. Despite the decline, the monthly picture remains constructive, with GBP/USD strengthening 2.18% over the past month and sitting 0.52% higher over twelve months.
The weekly path tells a different story, however, as sterling has given back about half of its gains from the previous week. The reversal was triggered by two key events: Wednesday's US inflation data, which pushed the dollar higher and knocked Cable lower, and Thursday's labour print, which saw initial jobless claims drop to 203,000 last week against a 209,000 consensus.
The 203,000 claims print has removed the last argument for a Fed hold and hands the hawks three weeks before the September FOMC. The dollar is now seen as having sticky inflation, in-line growth, a business investment beat, and a labour market showing almost no involuntary separations.
The pound's own rate story has deteriorated faster than the dollar's has improved, with markets pushing expectations for the next Bank of England rate hike into 2027 from late 2026. Around 24 basis points of tightening is priced by December and 36 basis points by February 2027. For the September meeting specifically, less than 4 basis points is priced, implying roughly a 15% chance of a move.