Pound Sterling (GBP)

Sterling has climbed to its strongest level against the U.S. dollar in more than three years, largely because disappointing U.S. labour-market numbers and rising jobless claims are sapping confidence in the dollar. Traders expect Friday’s non-farm payrolls report to be soft as well, which could add further support to the pound. Even so, any upside surprise in U.S. data could quickly knock the currency back, and—with almost no major U.K. releases on the calendar—sterling’s next moves will be dictated mainly by U.S. figures and the broader risk mood.

Euro (EUR)

The euro firmed after the European Central Bank trimmed its key rate by 25 basis points to 2 percent. President Christine Lagarde hinted that this might be the final cut of the cycle and sounded confident about getting inflation under control, which investors read as mildly hawkish. Analysts think the single currency could stay on the front foot as the yield gap between Europe and the U.S. narrows, capital rotates toward European assets, and investors continue diversifying globally.

U.S. Dollar (USD)

The dollar has softened ahead of the closely watched non-farm payrolls release. A run of weaker-than-expected data—higher jobless claims, a sluggish ISM services survey, and a soft ADP employment print—has reinforced the view that the labour market is cooling and growth is losing steam, raising chatter about stagflation risks. While the Federal Reserve is still expected to keep rates unchanged at its June meeting, stubborn inflation leaves policymakers with little room for error.