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Dollar strength will be difficult for the British pound to resist; look for further pound-to-dollar weakness in the outlook.
The pound is forecast to slip below $1.33 in the coming days as the short-term setup turns increasingly favours the dollar to build on recent gains.
A solid run of U.S. data sets the foreign exchange market for a solid headline U.S. jobs report on Friday, which if delivered, would seal a negative weekly close for GBP/USD.
"The US economic surprise index has risen to its highest level since late 2023," says George Vessey, analyst at Convera. "The US economy may be re‑accelerating at the margin, providing a firmer macro anchor for the USD."
Dollar strength ensures the technical outlook for GBP/USD has deteriorated in recent sessions as a cluster of moving averages begins to cap recovery attempts.
The 21-day average has repeatedly pushed back against rallies over the past fortnight, while the 100-day average near 1.3480 is reinforcing resistance overhead:
Further losses are likely, as the pair is now trading below its 21-, 50-, and 100-day moving averages, with the 21-day having crossed below the 50-day.
Recent history indicates that such a crossover indicates enough momentum in the preceding selloff to extend the move to lower levels.
Support at 1.3296 looks to be attracting the exchange rate now, where some support could emerge, but the risk of a downside break would expose 1.3250 initially and potentially the April low at 1.3160.
Pound sterling would need to reclaim the 1.3450-1.3480 region to neutralise the bearish bias.
For that, the dollar would need to turn weaker. "The dollar has found broad-based support after U.S.-Iran military re-escalation and data that keeps pointing to U.S. economic resilience," says Francesco Pesole, FX Strategist at ING Bank.
Data this week has come in on the hot side, pointing to the likelihood of persistent inflationary conditions that the Federal Reserve will find hard to ignore.
ISM PMIs for manufacturing and services exceeded expectations in May, according to data released midweek.
That followed Tuesday's surprisingly strong jobs opening data, which signalled employers might be set to increase hiring, in line with the view that the healthy corporate profits seen in the recent reporting cycle would typically be consistent with a pick-up in hiring.
Wednesday's ADP payroll figures showed 122k jobs were added in May, which sets the market up for a solid non-farm payroll report on Friday.
The release will be the marquee event of the week, and a solid read would destine pound-dollar to a second consecutive weekly close in the red.
