GBP/USD Outlook: Pound Strengthens Near 1.3450 Amid Dovish Fed Remarks and Mixed UK Jobs Data

The British Pound (GBP) extends its recovery against the US Dollar (USD) on Friday, with GBP/USD climbing toward 1.3450 during early Asian trading. This rebound follows a soft performance in the previous session and is driven by improved risk sentiment and dovish commentary from key Federal Reserve officials.

Dovish Fed Comments Weigh on USD

The US Dollar weakened as Federal Reserve officials signaled a softer stance on monetary policy. San Francisco Fed President Mary Daly called the outlook for two rate cuts in 2025 “reasonable,” cautioning against waiting too long to ease policy. She also projected that the long-term neutral interest rate may settle around 3%—above pre-pandemic levels.

Fed Governor Christopher Waller echoed a dovish tone, suggesting the central bank should begin lowering rates as early as the July meeting due to mounting economic risks. He warned that delaying rate cuts could force the Fed to take more aggressive action later.

Retail Sales Surprise Supports Dollar Briefly

Despite dovish Fedspeak, the US Dollar found temporary support after upbeat June retail sales figures. US Retail Sales rose by 0.6% month-over-month—well above the expected 0.1% increase and a sharp reversal from May’s -0.9% reading. On an annual basis, sales rose 3.9%, up from 3.3% in May.

Traders will now shift focus to upcoming US economic data, including the University of Michigan Consumer Sentiment Index, Building Permits, and Housing Starts, all due later Friday.

Mixed UK Labor Market Data Offers Modest Pound Support

The Pound Sterling also found support from mixed UK employment figures. While job creation increased, the unemployment rate unexpectedly ticked higher:

• UK ILO Unemployment Rate rose to 4.7% (vs. expected 4.6%) in the three months to May.
• Claimant Count Change climbed by 25.9K in June, well above the prior month’s revised 15.3K and the forecast of 17.9K.

The data suggest some labor market softness, but the uptick in employment may limit the downside for GBP.

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