GBP/USD gains further as dollar weakens

GBP/USD climbed for a second consecutive day on Thursday, setting the stage for a bullish rebound, although it failed to reclaim the 1.3200 level. Market sentiment remained high as fewer than expected job gains dampened prospects for an extended rate cut by the Federal Reserve.

UK economic data remains light as markets head into Friday. The new U.S. non-farm payrolls (NFP) employment data to be released in the last U.S. market trading session this week is expected to be the focus.

The U.S. added 99,000 net new jobs in August, down from a revised 111,000 in July and well below expectations of 145,000, according to payroll processor ADP. August's ADP job creation was the lowest since early 2021, sparking a new wave of risk aversion and reigniting investor concerns that the U.S. economy may be heading into recession.

Changes in U.S. ADP employment numbers are the market's indicator of the U.S. non-farm payrolls expected to be released on Friday, even though the report's accuracy record is not stable. The August non-farm payrolls data is the last important labor force data update before the Federal Reserve's (Fed) interest rate meeting on September 18, when Fed policymakers are widely expected to start a rate cut cycle. Friday's nonfarm payrolls figure is expected to be 160,000, down from 114,000 last month.

Interest rate markets are currently betting on a 40% chance the Fed will cut interest rates by 50 basis points later this month, according to the CME Group's FedWatch Tool. The remaining 60% of investors are betting that the Fed will cut interest rates by 25 basis points later this month. Investors are expected to use Friday's non-farm data to gauge the extent of the Fed's first rate cut since March 2020, when it cut interest rates by 100 basis points.