Sterling surged toward its 2025 high and appears poised to test 2025 highs by 1.3593, after today's U.S. ADP data fell short of Reuters consensus expectations, rising by 37k versus the forecast of a 110k rise and boosting expectations of faster and deeper Fed cuts.

Markets will now focus on Thursday's claims data and the always important payroll data on Friday.

LSEG’s IRPR suggests the Fed and BoE will likely end 2025 just below 4%. If the upcoming jobs data confirms weakening U.S. employment, a more-dovish Fed outlook could push GBP/USD past the 1.3593, 2025 high, toward 2022 highs above 1.37.

Sterling appears well positioned to continue rising, supported by the recently closed UK-U.S. trade deal which keeps Britain removed from the front line of the Trump trade war.

If Thursday's claims and Friday's payrolls data confirm a softening labor market, a shift to more dovish Fed expectations may gain traction, lifting GBP/USD above the 2025 high at 1.3593, and putting January 2022 peaks above 1.37 in sharper focus.
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(Paul Spirgel is a Reuters market analyst. The views expressed are his own)