Sterling is likely to stabilize around the 1.36 mark as market sentiment improves and fiscal concerns ease.

Following the release of stronger-than-expected U.S. payrolls data, GBP/USD initially fell to a session low of 1.3586, reflecting heightened expectations for a less dovish Federal Reserve. However, the currency has since regained the 1.36 level, suggesting that bearish sentiment surrounding the pound may have peaked.

The recent decline in sterling appears muted when compared to other major currencies, indicating that traders may be reassessing their positions.

UK gilts have also shown signs of recovery, with 5-year yields down 2 basis points, while 5-year U.S. Treasury yields increased by nearly 7 basis points. This divergence suggests that the selloff in GBP/USD following the gilt market's reaction may have been excessive.

Support for sterling is evident near its rising 30-day moving average at 1.3561. Should sterling close below this level, particularly in response to a more hawkish Fed or dovish Bank of England expectations, it may trigger further declines toward the June 23 trend low of 1.3373. Should that level be breached, bearish momentum could push GBP toward 1.3250 and below, challenging the psychological barrier of 1.30.
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(Paul Spirgel is a Reuters market analyst. The views expressed are his own)