Sterling and the euro posted small gains on Thursday as both currencies found limited support against a broadly firmer dollar that paused ahead of a key U.S. jobs release.
As of 08:40 ET (12:40 GMT), GBP/USD was trading up 0.27% at 1.3459, while EUR/USD had risen 0.35% to 1.1640, with both currency pairs attempting to claw back losses incurred during the previous session.
Despite the intraday uptick in euro and sterling, the dollar’s underlying position remains solid. Wednesday’s data flow, including a stronger-than-expected ADP employment print and a robust ISM Services PMI, reinforced the view of a resilient U.S. economy and kept expectations for a higher-for-longer interest rate profile in place.
The Federal Reserve’s Beige Book, also published on Wednesday, pointed to steady conditions in the labor market even as inflationary pressures continue, providing little evidence of a near-term shift to a dovish policy stance.
Thursday’s U.S. economic calendar is lighter, with market attention focused on Challenger job cuts and weekly jobless claims. The report notes these releases are unlikely to move markets significantly unless they show a material deterioration. The real market test is set for Friday, when the May non-farm payrolls report is due and could either reinforce or undermine the dollar’s recent momentum.
Geopolitical developments remain a potent secondary influence on currency moves. Ongoing U.S.-Iran military exchanges have maintained a risk-off undertone across global markets. Francesco Pesole at ING highlighted that a number of major dollar crosses are probing critical thresholds, citing EUR/USD at 1.160, USD/JPY at 160 and USD/CAD at 1.390 as pairs attempting decisive breaks of important psychological levels.
Market commentary in the piece also noted that the Dollar Index is viewed as approaching the 100 mark should the situation in the Middle East not show tangible progress toward resolution.
For the euro, the pair is holding just above the 1.160 level flagged as a key support area. Markets continue to price a 25 basis point ECB rate increase at next week’s policy meeting, and ING’s assessment is that the bank will lean toward a hawkish stance to keep further tightening priced in and to help anchor inflation expectations.
However, the modest gains seen on Thursday provide limited encouragement for euro bulls. ING warned that a lack of diplomatic progress in the Gulf could push EUR/USD back toward 1.150 before the ECB meets. An upward revision to the eurozone’s composite PMIs on Wednesday offered little lasting support, with sentiment still sensitive to energy price swings and the broader appetite for risk.
Sterling’s recovery was similarly fragile. Thursday’s tentative advance in GBP/USD followed a sharp pullback on Wednesday after the UK Services PMI fell into contraction for the first time in more than a year and the Composite PMI dipped below the 50 mark. Ongoing input cost pressures complicate the Bank of England’s policy calculus, and the prevailing global risk-off tone constrains the pound’s upward potential.
The move back to roughly 1.3457 in GBP/USD is described as fragile in the absence of new domestic catalysts, leaving Friday’s U.S. payrolls report as a likely determinant of the next directional move for the pair.
In sum, the session saw modest gains for two major European currencies, but those advances remain precarious amid firm U.S. economic signals, hawkish central bank expectations in Europe, and geopolitical uncertainty that continues to shape global risk sentiment.