GBP/USD settles into holding pattern ahead of key US NFP jobs data

• GBP/USD spun a tight circle near 1.3430 on Thursday.
• Cable traders are hunkering down ahead of Friday's bombshell NFP print.
• Broad-market Fed rate cut hopes are pinned on a continued easing in US job creation.

GBP/USD slowed to a crawl on Thursday, remaining stuck close to 1.3430 after a volatile showing through the week's earlier sessions. US Nonfarm Payrolls (NFP) are always a high-impact affair, but this Friday's US jobs showdown has taken on an even greater importance than usual.

Markets are clamoring for an interest rate cut from the Federal Reserve (Fed) this month, and tunnel-vision traders are cheering on a deepening slump in US employment data. Despite a near-term uptick in inflation data effectively wiping out the year's progress on taming inflation, investors are hoping that a souring US labor market will force the Fed to disregard inflation pressures and deliver interest rate cuts before the end of the third quarter to prop up the domestic economy's job creation.

Potential for a real bombshell in US NFP this month

Interest rate expectations are playing a dangerous game of chicken between inflation, job creation, and recession indicators: investors remain convinced that the US economy is in such a rough spot that immediate action from the Fed is required, but not in such bad shape that a full-blown recession will hit businesses and consumers still grappling to figure out life with ever-changing tariffs under Donald Trump's presidential regime.

United Kingdom (UK) Retail Sales are due early on Friday, and are expected to show a sharp slowdown to 0.2% in July from the previous 0.9%. Overall market reaction is likely to be muted ahead of August's upcoming US NFP, however. The latest US net job additions figures are expected to hold on the low side at a sluggish 75K to keep rate cut hopes alive.

Rate markets fully price in a September rate cut

According to the CME's FedWatch Tool, rate markets are pricing in a functionally done deal on an interest rate cut on September 17, with odds of a 25 basis point cut this month set at 99.4% as of writing. Interest rate traders are also pricing in better-than-even odds of a follow-up cut in October, but slightly higher odds of a delay to December, before odds finally converge on a third interest rate cut in January of 2026.

GBP/USD daily chart