GBP/USD Rebound Possible as Weaker US Payrolls Offset Rate Hike Bets

The Pound to US Dollar exchange rate experienced significant selling pressure last week due to rising expectations of an interest rate hike by the Federal Reserve. At $1.3661, the GBP/USD was down around 0.7% from the start of the previous week's session.

Despite some uncertainty over Iran sanctions and their potential impact on global markets, the US Dollar strengthened in mid-week trade as the core PCE price index showed inflation remains above the Federal Reserve's target. This revived bets for a rate hike later this year.

The Pound, however, initially held its ground, drawing support from research suggesting Britain's productivity trajectory is recovering faster than official data indicates. Nevertheless, it soon lost momentum and was left exposed to shifting market sentiment.

This week, attention will be focused on the latest non-farm payroll print, which could apply pressure to the US Dollar if there are further signs of a cooling labor market. The ISM manufacturing and services PMIs may also provide insight into the resilience of the US private sector.