The British pound climbed to its highest level since October, with GBP/USD breaking above the 1.3200 mark in Monday trading, as investors positioned ahead of key UK labor market data due later this week. The move reflects growing optimism about the UK economy and shifting expectations around central bank policy.
The rally comes amid a broader pullback in the US dollar, driven by increased speculation that the Federal Reserve may begin easing interest rates in the second half of the year. At the same time, solid economic indicators in the UK have helped support sterling, with traders betting the Bank of England may hold off on cutting rates as quickly as some of its global peers.
Sterling has gained more than 2% against the dollar this month, boosted by resilient services activity, slowing inflation, and stronger-than-expected GDP figures. The UK jobs report, due Tuesday, is seen as a key test for the pound’s momentum. A tighter labor market or surprise wage growth could reinforce expectations that rate cuts are not imminent.
Market pricing currently suggests that the BoE may delay its first rate cut until the third quarter, in contrast to earlier projections of a move as early as May. That shift has helped underpin sterling, particularly against the backdrop of softening US economic data and more dovish commentary from Fed officials.
“Markets are reassessing the BoE’s trajectory relative to the Fed, and that’s giving the pound room to run,” said a London-based FX strategist. “If UK wage growth comes in hot, we could see GBP/USD test even higher levels in the short term.”
The pair last traded around 1.3210, up 0.4% on the day. Investors will be watching both the UK jobs data and upcoming Fed commentary closely, with volatility likely to rise as policy divergence becomes more pronounced.
