GBPUSD gains as markets await US employment data

On September 5, 2025, the GBPUSD pair was seen opening at 1.34533, with signs of recovery being shown after a period of significant pressure. Earlier in the week, investor sentiment was primarily shaped by mounting concerns over the UK government's capacity to effectively manage its financial affairs. This anxiety was reflected in the UK's 30-year bond yield surging to its highest level since 1998, which weighed heavily on the pound.

The currency found temporary support from better-than-expected July retail sales data, thus showing a 0.6% month-on-month hike. What is more important, the market has stabilized after recent volatility, as investors adopt a cautious stance ahead of the key US Nonfarm Payroll report due later that day. Adding to the supportive tone, the Bank of England is now considering a pause in its easing cycle, a prospect that gives strength to the pound.

However, underlying challenges persist. Political uncertainty continues to cloud the outlook following recent reshuffles in Prime Minister Starmer's team. The sterling is facing headwinds due to mounting expectations that Chancellor Rachel Reeves is about to raise taxes to meet her fiscal rules. 

The US employment report is the main focus among investors right now. Weak data will bolster forecasts for an imminent Federal Reserve rate cut, likely pressuring the American dollar and providing a tailwind for GBPUSD. Conversely, strong reports will reinforce the greenback's power.

From a technical perspective, the pair sits in a recovery phase after it went down on August 2. The Stochastic Oscillator is in a neutral zone, having fallen from overbought territory. Although a divergence between the indicator and price dynamics suggests potential weakness, the On-Balance Volume (OBV) shows modest growth, which effectively negates the bearish signal from the Stochastic. This technical setup suggests the advance will likely continue, albeit at a more sluggish pace.

Review the trading plan detailed below:

Buy at the current price. Take profit: 1.35800. Stop loss: 1.33500.

This forecast is valid from September 5 to September 12, 2025.