The GBPUSD is facing pressure from stagflation on all sides! The Bank of England’s hawks-versus-doves split is intensifying, making the interest rate path uncertain—UK (England) included.

（Source: Lingsheng Optivest）

Fundamentals Summary:

1. U.S. nonfarm payrolls in March rebounded sharply, adding 178k jobs well above expectations.

On April 3, local time (last Friday), the U.S. Bureau of Labor Statistics officially released its March 2026 nonfarm payrolls report. The data showed a strong rebound, with core indicators coming in across the board better than market expectations. In that month, the number of U.S. nonfarm payroll jobs added was 178k, far higher than the economists’ prior expectation of 65k, marking the largest single-month increase since December 2024. The report also revised the data for the previous two months. January’s added employment was revised up from 126k to 160k, and February’s figures were revised from a decrease of 92k to a decrease of 133k. Together, the two months saw a combined revision of a decrease of 7,000 jobs. The March unemployment rate edged down to 4.3%, below expectations and the prior reading of 4.4%. The resilience of the labor market went beyond the market’s earlier, more pessimistic assessment.

In terms of the employment growth mix, the rebound in March was mainly driven by the fading of the disruptions that had affected February. The healthcare industry became the largest source of contribution. In that month, 76k new positions were added, far above the past year’s monthly average of 29k. Among the newly added outpatient medical service roles, more than 30k were previously laid off workers returning after a strike. Construction added 26k jobs, while transportation and warehousing added 21k. Within that, the courier and messenger industry contributed 20k jobs, together supporting overall employment growth. Employment at federal government departments continued to decline. In March, it fell by 18k jobs. The financial activities sector saw employment decline by 15k jobs; within that, finance and insurance fell by 16k jobs, becoming one of the few areas experiencing contraction.

Regarding wages and labor supply, the average hourly earnings in March rose 0.2% month over month to $37.38. The year-over-year growth rate slowed to 3.5%. Both figures were below market expectations, and the year-over-year pace hit a new low since May 2021. Meanwhile, the labor force participation rate fell to 61.9%, the lowest level since 2021. This corresponded to a reduction of 396k in the labor force, and immigration policy suppressing labor supply became an important background factor behind the unemployment rate remaining at a low level. Average weekly hours declined by 0.1 hours month over month to 34.2 hours. Weekly pay dipped slightly month over month, indicating that employment growth was accompanied by a mild cooling in both wages and hours.

This report, which exceeded expectations, significantly affected market expectations for Federal Reserve policy. After the data release, the market’s probability for the Fed to cut rates by 25 basis points in June plunged to 2.0%, and expectations that rates would stay high strengthened markedly. The U.S. dollar index rose in the short term. U.S. two-year Treasury yields briefly climbed to 3.88%. U.S. stock index futures fell slightly, with asset prices broadly reflecting the view that monetary policy would remain tight for a longer period. Analysts generally believe that the March data was more a repair of short-term shocks such as the February strikes and adverse weather, and that the sustainability of the employment recovery still needs to be monitored. Meanwhile, the slowdown in wage growth provides the Fed with some room to combat inflation.

2. U.S. service sector growth slowed in March, and input prices climbed to a nearly three-and-a-half-year high.

U.S. service sector growth slowed in March. The prices that companies paid for inputs rose to the highest level in nearly three and a half years, initially suggesting that the long-running conflict with Iran is intensifying inflationary pressure. Data released by the Institute for Supply Management on Monday showed that the March non-manufacturing purchasing managers’ index (PMI) fell slightly from 56.1 in February to 54.0, below the 54.9 forecast by Reuters survey economists. A PMI above 50 indicates service sector expansion, and this sector accounts for more than two-thirds of economic activity in the U.S.

The conflict between the U.S. and Israel with Iran has entered its second month, pushing global oil prices up by more than 50%. The nationwide average retail gasoline price broke above $4 per gallon for the first time in three years. Economists expect that the inflation shock from this war will show up in the March consumer price index report. With expectations for the conflict in the Middle East escalating, producer prices already rose in February.

In the ISM survey, the metric measuring companies’ input prices surged to 70.7, the highest since October 2022; the February reading was 63.0. Companies attributed the persistent elevation of this metric to the large-scale tariff policies implemented by President Trump—although these policies were later ruled invalid by the U.S. Supreme Court, Trump instead rolled out a 150-day global tariff. In the survey, the metric measuring supplier delivery performance rose from 53.9% in February to 56.2%. A reading above 50% indicates slower deliveries, consistent with longer factory lead times, and food, beverage, and tobacco producers all mentioned “container delays.”

The expected inflation impact triggered by the conflict has significantly reduced the likelihood of rate cuts this year. The Fed kept the benchmark overnight rate unchanged in the range of 3.50% to 3.75% last month. The survey shows the new orders index rose to a two-year high of 60.6 (58.6 in February), but the pace of growth in export orders slowed sharply, and growth in uncompleted orders also eased. Service sector employment shrank, with employment indicators falling to the lowest level since December 2023. This stands in sharp contrast to the strong rebound shown in the March jobs report, which indicated that private services added 143k jobs—however, the ISM employment index is not a reliable indicator for predicting the number of private services jobs.

3. The New York Fed says March global supply chain pressure rose to the highest level since early 2023.

Data released by the New York Federal Reserve Bank on Monday showed that in March, global supply chain pressure rose to the highest level since early 2023. According to the bank’s latest Global Supply Chain Pressure Index, the indicator rose from 0.54 in February to 0.68. A reading of zero indicates supply pressure is at normal levels, while a positive value indicates pressure is increasing.

The New York Fed did not explain the reasons for the rise in March pressure, but it is almost certain that it is related to the economic disruptions caused by the Middle East war triggered by U.S. and Israeli strikes on Iran. However, even with some increase in March, the current figure remains far below the 4.49 level in December 2021, when the COVID-19 pandemic was putting enormous strain on the global economy.

On April 7, Beijing time (Tuesday), there are no major important data releases scheduled in the UK on the economic fundamentals front. At 20:30 in the evening, the U.S. will publish its February orders for durable goods on a monthly basis.

Economic News

Markets move ahead of the “passive tightening,” and the Bank of England faces a policy dilemma. Driven by the energy shock sparked by the conflict in the Middle East, global financial conditions are becoming increasingly unstable. The latest assessment by the UK’s Monetary Policy Committee shows that asset price volatility has risen significantly, and the market’s ability to price the fundamentals has declined. Against this backdrop, the market has effectively already completed part of the “tightening” for the Bank of England in advance—tightening financial conditions appears to be moving ahead of the policy itself.

This “passive tightening” shows up in multiple dimensions: rising interest rate swaps push fixed mortgage rates significantly higher, with the UK two-year and five-year mortgage rates rising by roughly 70 to 80 basis points; at the same time, the number of mortgage products available in the market has fallen markedly, and financial institutions are proactively reducing their risk exposure. Even if the central bank has not yet raised rates further, households have already felt the meaningful tightening in financing conditions.

In addition, the high-leverage trading strategies of hedge funds concentrated in the UK government bond market make yields extremely sensitive to risk sentiment, which could trigger a sudden drop in liquidity and non-linear tightening in financial conditions. Valuations of stocks and other risk assets are also under pressure, and UK and European stock markets have shown signs of pullbacks.

Inflation expectations rebound, and internal disagreement at the central bank widens. As energy prices once again become the dominant factor driving inflation, policy disagreements within the Bank of England have expanded rapidly. The rare “unanimous hold” in the March meeting is likely only a temporary consensus. With the Middle East conflict causing oil and gas prices to skyrocket, the UK—an economy highly dependent on natural gas—faces imported inflation pressure. The central bank expects inflation to rise again to around 3.5% in mid-2026, significantly above its 2% target.

Hawkish members argue that higher rates are necessary to prevent inflation expectations from getting out of control, and to avoid a “second-round inflation” effect as the energy shock transmits to wages and service prices. Doves point out that rate hikes cannot increase energy supply, and may further suppress demand when the economy is already weak. Economic fundamentals have shown signs of slowing, and some forecasts suggest UK inflation could rise back toward 5% this year, while economic growth is only near stagnation. The “risk of stagflation” has become a core point of contention in policy discussions.

The April meeting of the Monetary Policy Committee is likely to shift from “consensus” to “division.” The Bank of England governor previously said that market pricing for the rate-hike path may be “too aggressive,” suggesting policymakers are more inclined to act cautiously. The future policy path will likely show the features of “data dependence + intensifying internal disagreement.”

Political News

The government faces pressure and plans to ban Kanye West from entering the country. The UK government faced mounting pressure on Monday to ban the American rapper Kanye West (now known as Ye). West was announced as the headlining guest for Wireless, a rap and hip-hop music festival to be held in July. However, he has previously drawn widespread criticism for his antisemitic remarks and his praise of Nazism, and his social media accounts have been banned multiple times.

The main opposition Conservative Party has written to the Home Secretary, Shabana Mahmood, urging her to use her powers to keep West out. A source from the UK Home Office confirmed that ministers are currently reviewing his entry clearance. Although the Home Office typically does not comment on individual cases, Mahmood has the authority to make a personal decision to bar entry. In January of this year, the Home Office revoked the electronic travel authorization of a Dutch far-right activist on the grounds of “spreading false information.”

Statements from the Prime Minister and others. UK Prime Minister Keir Starmer said the decision to invite West to take part in a London music festival is “deeply concerning.” He emphasized: “Any form of antisemitism is abhorrent, and must be firmly challenged wherever it appears. Everyone has a responsibility to ensure that the UK is a place where Jewish people feel safe.”

A spokesperson for London Mayor Sadiq Khan said West’s comments do not represent London’s values, but the decision rests with the festival organizers. The Jewish Leadership Council condemned the organizers last week, pointing out that attacks targeting Jewish people are increasing.

Sponsors pull out. West’s controversial statements have had commercial consequences. Longtime sponsors Diageo and PepsiCo said they have withdrawn support for Wireless, and PayPal also confirmed that its brand logo will not appear in any future promotional materials.

Financial News

On Monday, the UK stock market closed for the holiday.

Geopolitical Developments

Trump issues a final warning to Iran: if no deal is reached by Tuesday night, it will face “destruction.” In a press conference at the White House on Monday, U.S. President Donald Trump warned that Iran “can be wiped out overnight, and that night could be tomorrow night.” He demanded that Tehran reach an agreement by Tuesday evening (8:00 p.m. Eastern Time) to give up nuclear weapons and reopen the Strait of Hormuz, or it would face large-scale strikes on infrastructure such as power generation plants. Trump said the peace proposals submitted by Iran are “meaningful but not good enough,” and he added that it is “highly unlikely” the deadline will be extended again.

Pentagon officials said Pete Hegseth disclosed that on Monday, the largest-scale airstrikes since the outbreak of the war had been carried out, and the intensity of airstrikes on Tuesday would be increased further. At the same time, Trump and Hegseth outlined the weekend process of successfully rescuing a downed pilot codenamed “44 Bravo.” CIA Director John Ratcliffe said the CIA misled Iranian forces through a “deception operation,” ultimately rescuing the pilot hiding in a mountain crevice. Hegseth compared the operation to the resurrection of Jesus: “Dropped on Friday, hiding in a cave on Saturday, rescued at dawn on Sunday, sent out of Iran at the time of Easter.”

Iran’s official news agency reported that Tehran, in response to the U.S. proposal through the mediator Pakistan, rejected a temporary ceasefire, demanded a permanent end to the war, and proposed ten provisions including lifting sanctions, reconstruction, and drafting a secure passage agreement for the strait. An Iranian Ministry of Foreign Affairs spokesperson said Iran’s demands “should not be interpreted as signals of compromise.” In practice, Iran has already blocked the Strait of Hormuz, which carries about one-fifth of the world’s oil and natural gas shipments.

Israel expands military actions in Lebanon and Gaza. Israel’s strikes on Lebanon continued to escalate. On Sunday night, Israeli airstrikes hit an apartment building in Ain Saad, a Christian town in eastern Beirut, killing three people including Pierre Muaawad, a local official of the Lebanese Forces Party, and his wife. The Israeli military said the target of the attack was a “terror target,” and that Muaawad “was not the target.” The airstrike triggered strong dissatisfaction among Christian political parties, who accused Hezbollah of dragging Lebanon into the war. Israel has ordered residents of 40 villages in southern Lebanon to evacuate, and the evacuation order covers 15% of Lebanon’s territory. The conflict has resulted in nearly 1,500 deaths on the Lebanese side and more than one million people displaced.

In Gaza, Israeli airstrikes hit a school sheltering displaced Palestinians, killing at least 10 people. Previously, clashes broke out between Palestinians and militia groups supported by Israel. Since the ceasefire last October, Israeli artillery has caused at least 700 deaths in Gaza. Hamas has refused to give up its weapons, becoming a major obstacle to negotiations over Trump’s Gaza peace plan.

Russia and Ukraine carry out large-scale drone attacks on each other. Russia said on Monday that Ukrainian drone strikes on the Black Sea port of Novorossiysk caused at least eight people to be injured and damaged multiple residential buildings. The port is Russia’s largest export terminal in the Black Sea and is also the location of the Caspian Pipeline Consortium terminal. The Russian military said it shot down 148 drones within three hours, and nearly 500k households were temporarily without power.

On the Ukrainian side, Russian forces carried out drone strikes on Odessa overnight, killing a 30-year-old mother and her 2-year-old daughter, as well as another woman. Sixteen people were injured, and about 16,700 households lost power. Ukrainian President Zelensky said Russia launched 140 drones overnight, striking multiple energy infrastructure facilities, and once again called for stronger air defenses.

Ukraine’s Commander-in-Chief Syrskyi said that since late January, Ukrainian forces have regained control of 480 square kilometers of territory in the southeast and east, including eight settlements in Dnipropetrovsk Oblast and four settlements in Zaporizhzhia Oblast. But Russian forces are still pushing a spring offensive, trying to establish a “buffer zone” in Donetsk. Zelensky reiterated his proposal for an equivalent ceasefire: if Russia stops strikes on energy infrastructure, Ukraine is also willing to ceasefire, but he said Russia seems unwilling to agree to a truce over Easter.

Technical Spy Tactics

Intraday outlook for the pound sterling/US dollar price range:

1.3250-1.3170

Technical indicator summary:

On Monday, most European markets remained closed for the Easter holiday, while U.S. stock markets opened normally, and the U.S. dollar index continued to hover around the 100 level. Pressured by the firm U.S. dollar, the GBP/USD exchange rate held near its low levels from the past nearly four months. The day’s high reached 1.3267 and the low dipped to 1.3176. Overall, it showed a choppy and somewhat weak pattern.

The direction of developments in the Middle East situation remains the most core variable for the current market. Concerning last week’s reported reception by relevant parties of a ceasefire proposal drafted by Pakistan, the framework follows two steps: first, achieve a temporary ceasefire and reopen the Strait of Hormuz; then, within 15 to 20 days, reach a broader final agreement that may involve Iran’s commitment not to pursue nuclear weapons in exchange for sanctions relief and the unfreezing of frozen assets. Sources said the agreement could take effect on April 6, but as of now, Iran has not provided a clear commitment. Iran Foreign Ministry spokesperson Baghaei said at a press conference that Iran is prepared to respond to the ceasefire-ending plan conveyed by the mediator and will announce it in due course. However, he also pointed out that a recommendation previously proposed by the U.S. was “extremely excessive,” that Iran absolutely cannot accept it, and that Iran refuses any form of temporary ceasefire agreement because experience shows such ceasefires often only create breathing room for strengthening forces and preparing further aggression. This tug-of-war pattern of “fighting while negotiating” keeps investors’ nerves on edge.

On the economic data front, the U.S. March nonfarm payrolls report released last Friday far exceeded expectations—nonfarm payrolls increased by 178k, the largest gain in more than a year; the unemployment rate fell from 4.4% to 4.3%. Paul Gruenwald, Chief Global Economist at S&P Global, said in an interview that currently only one industry is truly driving employment growth: healthcare. The technology sector is declining, manufacturing is declining, and government departments are declining—so the foundation for employment growth is extremely narrow, which is itself a risk factor. He also clearly defined the current situation as a typical “supply shock”—output declines and inflation rises, with a forecast that U.S. inflation this year could rise significantly to around 4%.

Strong employment data further compressed market expectations for Fed rate cuts. According to CME FedWatch data, traders currently expect the Fed will not cut rates before October 2027. On Monday, the Wells Fargo Investment Research Institute said that given uncertainty in inflation and escalating geopolitical risks related to the Middle East war, it no longer expects the Fed to cut rates in 2026. Previously, its forecast was two rate cuts this year. Thomas Dith? (Tim?)/Director of Macroeconomic Research at Pictet Wealth Management, Switzerland, also noted that markets will initially expect global central banks to cut by a smaller magnitude, but the longer such a situation lasts, the greater the negative impact on the economic cycle. Central banks in different countries will eventually have to cut rates further—perhaps not in 2026, but in 2027.

CFRA Research Chief Investment Strategist Sam Stovall commented that the stock market is a good barometer of future activity, and investors are hoping the market can recover from the sell-off wave it experienced earlier. Wall Street is willing to take a wait-and-see stance, but the bet has been positive. However, this optimism still needs to be tested against this week’s data.

On this Friday, the U.S. March consumer price index report will be released. Economists expect headline CPI on a month-over-month basis could rise 1%, the largest single-month increase since 2022, and core CPI is expected to rise 0.3% month over month. An earlier research note from Soochow Securities said that although the latest U.S. February CPI fully met expectations and some core components’ month-over-month readings declined, the upward trend in oil prices driven by ongoing intensification of the U.S.-Iran conflict has already begun to make the market worry about the risk of second-round inflation in the future U.S. economy.

Matthew Miskin, co-chief investment strategist at Manulife John Hancock Investment Management Company, said the market will find it hard to shift attention away from the Middle East situation, oil prices, and risks that have already emerged. The market has long been overly focused on geopolitical risks and on how all of this will ultimately play out. In a forward-looking report, BNP Paribas stated that the first stage of oil-price transmission will show up through gasoline prices in March. Miskin added that he will pay attention to the “domino effects” that the war and surging energy prices may have on other commodities and services. He also believes that the March inflation report may not be enough to show broader impacts yet—it will just be necessary to get as much real-time data as possible to judge the trend.

Because of inflation concerns caused by the war, markets have largely ruled out the possibility of rate cuts this year—while earlier expectations of rate cuts had been a key support for many bullish stock market outlooks. Patrick Ryan, chief investment strategist at Madison Investment Company, said the market is currently very focused on inflation. If CPI data comes in far above expectations, the market may react negatively.

There are several other key data points to watch this week. On Thursday, another inflation indicator—personal consumption expenditures price index—will be released, but the data covers February, and most of the time period is still before the conflict erupted. On the same day, the latest data for U.S. fourth-quarter economic growth will also be released. Investors will also analyze the Federal Reserve’s March meeting minutes released on Wednesday to look for any hints about the future path of interest rates.

From a 4-hour cycle technical indicators perspective, yesterday’s GBP/USD price action mainly oscillated around the Bollinger Band midline at 1.3230, reflecting that near-term bulls and bears are temporarily in relative balance. The Bollinger Band opening is flattening, indicating that short-term volatility is starting to converge, and the price lacks a clear breakout direction. Currently, the upper band is around 1.3310 and forms dynamic resistance for a short-term rebound; the midline at 1.3230 is the key pivot level for the bulls-bears contest; and the lower band points to the 1.3160 area, providing dynamic short-term support. In terms of momentum indicators, the 14-period relative strength index (RSI) has fallen to 46, slightly below the neutral line of 50. This shows bearish momentum has a slight advantage, but it has not yet entered an oversold region; downside pressure in the short term is limited, though caution is still needed.

From the 4-hour structural pattern perspective, the GBP/USD exchange rate is still operating within a trend-like downside structure in which the recent phase of highs and lows shifts downward in tandem. Overall, the price center of gravity is weak, and it is currently in a weak consolidation and trading range. The short-term support area is around 1.3170. If that level is broken effectively, the bears could extend lower to the 1.3100 area or even below. Short-term overhead resistance is concentrated around 1.3250. Once the exchange rate regains a position above this resistance level, the bulls may target 1.3310 and even higher.

Overall, at the 4-hour level, GBP/USD is still constrained by downward-trend pressure. The Bollinger Band flattening and the RSI approaching 50 suggest the market is building up for the next wave of direction. In the absence of clear fundamental catalysts, the exchange rate may continue to consolidate and range between 1.3170 and 1.3250 repeatedly until an effective break above or below the range provides a clearer directional signal.

Short-term GBP/USD price path reference:

Upward: 1.3250-1.3310

Downward: 1.3170-1.3100

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责任编辑：郭建