GBP/USD Slips as Strong US Nonfarm Payrolls Revive Federal Reserve’s Hold Rate Outlook
By Christian Borjon Valencia, FXStreet
Published: March 4, 2026, 15:30 GMT
The GBP/USD currency pair extended its losses for the second consecutive day, declining by 0.12% to trade near 1.3205 following a blockbuster US Nonfarm Payrolls (NFP) report. The robust jobs data has prompted renewed speculation that the Federal Reserve (Fed) may hold interest rates steady amid ongoing inflation concerns that have persisted for five years.
US Jobs Surge Beats Expectations
The US Bureau of Labor Statistics reported on March payrolls that the economy added over 178,000 jobs in March, significantly outpacing market forecasts of just 60,000 new jobs. While February’s employment figures were revised downward to show a loss of 133,000 jobs, the unemployment rate declined to 4.3% from 4.4%, signaling a tightening labor market.
This stronger-than-expected labor market performance bolstered the US dollar, as reflected in a modest 0.12% gain for the US Dollar Index (DXY), pushing the index back above the psychologically important 100.00 level.
Softer Services Data Provide Mixed Signals
Despite the strong employment numbers, the US economy shows signs of strain elsewhere. The S&P Global US Services Purchasing Managers’ Index (PMI) dropped to 49.8 in March from 51.7 in February, marking the first contraction in the services sector since January 2023. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, noted that the decline reflects rising prices and increased uncertainty, exacerbated by the ongoing conflict in the Middle East. He emphasized the stagflationary challenges posed by stagnant growth coupled with surging inflation, which complicate policymakers’ decisions.
Market Reaction: Fed Outlook and Treasury Yields
Following the NFP release, investors revised their Fed rate expectations, trimming dovish bets. Futures data from the Chicago Board of Trade revealed growing consensus that the Fed is likely to maintain steady interest rates for the remainder of 2026 amidst the geopolitical tensions affecting commodity prices and inflation.
US Treasury yields, particularly the 2-year note yield, edged higher, mirroring increased confidence in sustained Fed policy. This firmer yield environment weighed on Sterling, contributing to the pound’s slide against the US dollar.
GBP/USD Technical Outlook
On the daily chart, GBP/USD is trading at approximately 1.3205 with a mildly bearish near-term bias. The pair remains below several clustered Simple Moving Averages (SMAs) near 1.3550, reflecting diminished upside momentum. Repeated failures to surpass the descending resistance trendline, which originates from the high of 1.3869, have kept GBP/USD on the defensive.
The pair has also retreated from an upward rising trendline beginning at 1.3035, increasing the focus on protecting recent lows rather than pushing for gains. The Fed Sentiment Index, which assesses market expectations of Federal Reserve policy, continues to rise, signaling a stronger US dollar environment that challenges any sterling rallies.
Immediate resistance is found near the psychological 1.3300 level, where the pair has previously stalled ahead of the descending trendline. Beyond that, hurdles are at 1.3400 and then at 1.3500, which corresponds to key moving averages. On the downside, support levels are at 1.3200 and then lower near 1.3100 and 1.3035. A daily close below 1.3035 could confirm a deeper bearish phase, whereas recovery above 1.3400 would alleviate near-term downside risks.
Weekly Performance: Pound Sterling Against Major Currencies
This week, the British Pound showed mixed performance against major currencies, with the strongest relative showing against the New Zealand Dollar. The following table illustrates percentage movements of GBP against selected currencies:
| Currency | Change vs GBP (%) |
|---|---|
| NZD | -0.54 |
| USD | -0.80 |
| EUR | -0.63 |
| JPY | -0.02 |
| CAD | -0.83 |
| AUD | +0.54 |
| CHF | -0.07 |
Summary
The unexpected strength of the US labor market in March has shifted market sentiment toward a Federal Reserve that may pause further interest rate hikes amid sustained inflation and geopolitical risks, including the Middle East conflict. This dynamic has strengthened the US dollar, pressuring GBP/USD lower and challenging sterling’s recovery prospects in the near term.
Investors and traders will be closely watching upcoming economic data, Fed minutes, and geopolitical developments that could influence the trajectory of both currencies and monetary policy decisions globally.
About the Author
Christian Borjon Valencia is a markets analyst, news editor, and trading instructor with over 14 years of experience in foreign exchange, commodities, US equities, and global macro markets.
This article contains technical analysis generated with the assistance of AI tools. It is intended for informational purposes and does not constitute investment advice.