GBP/USD + GBP/EUR Market Update

Post-NFP Dollar Retreat Lifts GBP/USD to 1.3373 and EUR/USD to 1.1456 as June Payrolls Disappoint at 57K, Friday, 03 July 2026

GBP/USD: 1.3373 | GBP/EUR: 1.1673 | EUR/USD: 1.1456

Thursday's US employment report delivered a significant miss, with nonfarm payrolls rising by just 57K in June, well below the 110K consensus, following a downwardly revised 129K in May. The dollar sold off sharply in response, with the dollar falling noticeably in the wake of the 57K print, almost half the 110K figure the market was watching. That move has carried over into Friday's Asian and early European session, with GBP/USD extending gains to 1.3373 and EUR/USD consolidating above the 1.1450 handle. US markets are closed today for Independence Day, meaning liquidity will be materially thinner than usual through the afternoon.

Overnight & Market Tone:

The post-NFP risk-on tone has carried into Friday's session. GBP/USD reflects strength as the dollar underperforms its peers following the softer-than-expected payrolls report, with the pair trading up from Thursday's pre-data level near 1.3318 to the current 1.3373. EUR/USD gained traction and clung to strong gains near the 1.1450 mark, reaching a fresh multi-day peak on Thursday, snapping a two-day losing streak. GBP/EUR has edged back to 1.1673, broadly stable as both sterling and the euro benefit in tandem from the weaker dollar. UK 10-year gilt yields gave up early gains to fall below 4.8% as weaker-than-expected US jobs data prompted investors to scale back expectations for further Federal Reserve rate hikes. Brent crude fell below $71 per barrel on Thursday, reaching its lowest level since late February as oil shipments through the Strait of Hormuz continued to increase and investors welcomed signs of progress in indirect US-Iran talks. The VIX closed at 16.59 on Wednesday evening (Cboe), consistent with a moderately calm risk environment, and the FTSE 100 is indicated modestly higher in pre-market trade.

UK Data & Bank of England:

There are no major UK data releases on today's calendar. The domestic narrative remains anchored by the June MPC decision and the evolving political backdrop. At its meeting ending on 17 June 2026, the MPC voted by a majority of 7-2 to maintain Bank Rate at 3.75%, with two members voting to increase Bank Rate by 0.25 percentage points to 4%. CPI inflation has fallen to 2.8% since the previous meeting, although it is expected to rise later this year as the effects of higher energy prices continue to pass through. On 18 June, the Bank said, based on energy market pricing as of 15 June, that CPI inflation was expected to be "a little under 3% in 2026 Q3" and "a little over 3.25% in Q4." The MPC's tone remains cautious rather than hawkish: Governor Bailey maintained a dovish tone, pointing to a slowing UK economy while stressing that persistent inflation risks rule out near-term rate cuts. As of 2 July, financial markets expected the Bank to hold borrowing costs at 3.75% for the rest of the year, although the outlook remains highly uncertain. The next MPC decision is due on 30 July, alongside a new Monetary Policy Report. The 18 June 7-2 vote set the tone going into 30 July; the US-Iran ceasefire has pulled energy prices down from their June spike, easing the near-term inflation picture, but services inflation at 3.7% keeps a hike on the table. On the political front, UK political shifts are unlikely to impact sterling materially until late July, when Andy Burnham is expected to take office as Prime Minister. The BoE's trade-weighted sterling effective exchange rate index currently stands at 105.17 (Bank of England), up 0.32% year-to-date, suggesting the currency is not under structural pressure despite the political transition.

European Backdrop & EUR/USD:

The ECB Governing Council raised its three key interest rates by 25 basis points at its 11 June meeting, taking the deposit facility rate to 2.25%. The war in the Middle East was cited as generating inflation pressures, with the decision described as robust across a range of scenarios. In the ECB's baseline projections, headline inflation is expected to average 3.0% in 2026, 2.3% in 2027 and 2.0% in 2028, while core inflation is projected at 2.5% in 2026 and 2027. The baseline sees economic growth at an average of 0.8% in 2026, a downward revision reflecting a more pronounced impact of the war on commodity markets, real incomes and confidence. The next ECB Governing Council meeting is on 23 July, and markets are debating whether a second 25bp hike will follow. Markets price a possible further ECB hike in September, though uncertainty lingers. The ECB's own framing at Sintra was notably balanced: President Lagarde characterised the 25bp June move as "a signal" that is "necessary given the economic situation," the uncertainty being navigated, and the inflation outlook. The question of whether 2.50% represents a meaningful threshold for the deposit rate was left deliberately open.

For EUR/USD specifically, the pair has recovered sharply from the 1.1324 trough seen in mid-June. EUR/USD had fallen sharply for a second consecutive week, trading as low as 1.1324 before recovering toward the 1.1410 zone, with the DXY peaking at 101.80, its highest in over a year, extending momentum triggered by the Fed's hawkish hold. Yesterday's NFP miss has reversed that dynamic decisively: EUR/USD gained traction and clung to strong gains near the 1.1450 mark, reaching a fresh multi-day peak, amid a marked correction in the dollar following the disappointing employment data. The pair now sits at 1.1456, back within the range that prevailed during the Sintra week. The ECB-Fed rate differential remains a key driver: with the ECB deposit rate at 2.25% and the Fed funds target at 3.50-3.75%, the gap between the Bank of England at 3.75% and the ECB at 2.25% has narrowed to 150 basis points after the ECB's June hike. The same narrowing applies to the Fed-ECB spread, which has compressed from its widest point earlier in the year. For treasurers managing direct EUR/USD exposures, the pair's recovery above 1.1450 is significant: it represents a 130-pip rally from the June trough and places the pair back in territory where the ECB's next move (hold or hike at 23 July) will be the dominant near-term driver. Historically, July has been a moderately positive month for EUR/USD, though June's broad-based dollar strength defied that seasonal tendency, falling 2% to test one-year lows near 1.1400; the near-term downtrend could continue despite the modestly bullish seasonal tendency if US data reasserts itself. With Brent now near $71 and falling, the energy-inflation argument for further ECB tightening is softening at the margin, which may cap EUR/USD upside on any recovery.

US Backdrop:

There is no imperative for the Fed to act immediately, and the softening in the pace of job growth suggests rate hikes are very unlikely to be necessary this year; following the jobs number, traders took a potential September hike off the table, though futures still point to a potential increase in October, according to CME FedWatch. In an appearance on Wednesday, Fed Chair Kevin Warsh called the jobs picture "steady" while continuing to emphasise the importance of bringing inflation down to the 2% target; inflation has been running above that goal for the past five years, with the most recent surge partly due to the Iran war and ongoing tariff impacts. US markets are closed today for Independence Day, so there are no data releases or Fed speakers scheduled. Market attention turns to next week's FOMC minutes for any signs of what could shift a divided Committee from a hold toward rate hikes.

Technical Picture:

GBP/USD: Resistance at 1.3400 (round number and near-term supply), then 1.3450 (early June high). Support at 1.3318 (Thursday's pre-NFP level), then 1.3250 and the key 1.3161 trough from 19 June.
GBP/EUR: Resistance at 1.1700 (psychological) and 1.1730 (recent range high). Support at 1.1620 (mid-week base), then 1.1535 (mid-June pivot).
EUR/USD: Resistance at 1.1480 (post-Sintra high) and 1.1530 (early June level). Support at 1.1399 (Thursday's pre-NFP base), then 1.1324 (June trough, per FXStreet).
Outlook: With the dollar under broad pressure following the NFP miss and US markets closed today, GBP/USD and EUR/USD are biased to hold recent gains in thin conditions; however, the absence of a structural shift in Fed policy means any further rally will face resistance as markets reassess the October hike probability through next week's FOMC minutes.

Today's Calendar:

With the US closed, the Eurozone retail sales print at 09.00am is the session's only scheduled tier-one data point; a beat would provide modest additional support to EUR/USD, while a miss would likely be absorbed without significant follow-through given thin conditions.

Outlook:

The NFP miss has materially shifted the near-term dollar narrative, and GBP/USD and EUR/USD are likely to consolidate their gains through today's shortened session; the key risk to the upside is a further softening in energy prices and any dovish signal from ECB speakers ahead of the 23 July meeting, while the key downside risk is a reassertion of Fed hike pricing if next week's FOMC minutes reveal a more hawkish internal debate than markets currently price. Treasurers with USD payables should consider whether today's improved levels warrant action ahead of the 23 July ECB and 29 July Fed decisions, which represent the next concentrated event-risk window for all three pairs.

This commentary is provided for informational purposes only and should not be construed as investment, legal, or tax advice. Past performance is not indicative of future results. Please consult with qualified professionals before making any financial decisions. Vantry Capital Ltd is authorised and regulated by the Financial Conduct Authority.