**GBP/USD Rises Amid Weak US Jobs Data and Growing Fed Rate Cut Bets**
*Based on reporting by Ali Baitizov | Source: FXDailyReport.com*
The British Pound (GBP) surged against the US Dollar (USD) recently, with the GBP/USD currency pair reaching multi-week highs as weak US economic data fuels speculation that the Federal Reserve could soon start easing monetary policy. Broadly, the shifting macroeconomic backdrop and evolving expectations about central bank actions continue to drive volatility and provide trading opportunities in the foreign exchange markets.
This article explores the latest movements in the GBP/USD pair, analyzes the underlying economic catalysts, examines future prospects, and offers insights for forex traders navigating the changing landscape.
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**GBP/USD Climbs on US Economic Concerns**
After a period of sideways trading, the GBP/USD pair notched notable gains in recent sessions. The upward move was largely attributed to disappointing US jobs data, which reinforced market anticipation that the Federal Reserve might pivot toward interest rate cuts sooner rather than later.
**Key Highlights:**
– **GBP/USD Rally:** The pair advanced past the 1.2700 mark, climbing to its highest level since early April.
– **Weak US Job Numbers:** The latest Non-Farm Payrolls (NFP) report showed a notable slowdown in job creation, missing consensus forecasts.
– **Fed Rate Cut Bets Grow:** Softening US labor data increased market expectations that the Federal Reserve will lower interest rates in the coming months.
– **Relative UK Economic Stability:** Despite moderate UK growth and mixed domestic data, the Pound found support as the outlook for US monetary policy turned more dovish.
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**US Jobs Report Deepens Dollar Weakness**
The US Department of Labor’s latest NFP data revealed a labor market losing momentum:
– **April Payroll Additions:** Only 175,000 jobs were added in April, substantially below the 243,000 expected by analysts.
– **Unemployment Rate:** The unemployment rate ticked up to 3.9%, up from 3.8% the month before.
– **Wage Growth:** Average hourly earnings increased a modest 0.2% month-on-month, also disappointing forecasts.
These developments signaled easing labor market conditions and reduced inflationary pressures, putting downward pressure on the greenback.
**Market Reactions:**
– The US Dollar Index (DXY), which measures the greenback against a basket of six major currencies, fell sharply following the data release.
– Treasury yields also retreated as investors priced in a greater likelihood of Fed rate cuts.
– Equities staged a moderate rally, betting that easier policy would support risk assets.
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**Fed Policy Outlook: Speculation Intensifies**
The Federal Reserve kept its policy rate steady at 5.25-5.5% during the May FOMC meeting, but Chair Jerome Powell acknowledged uncertainties and persistent inflation. Nonetheless, the central bank’s posture grew more cautious as key data weakened.
**Developments Affecting Rate-Cut Expectations:**
– **Disappointing Economic Indicators:** Not just job creation but manufacturing and consumer sentiment surveys have also weakened recently.
– **Inflation Moderating:** Though still above the Fed’s 2% target, inflation indicators have lost momentum, suggesting less need for restrictive policy.
– **Market Pricing:** Fed funds futures now price in a roughly 70% chance of a rate cut by September, up from below 50% a few weeks ago.
**Implications for the Dollar:**
– Markets anticipate that if the US central bank starts to ease before others, the dollar could weaken further against major peers.
– The Pound, Euro, and other currencies could gain at the greenback’s expense if the divergence becomes more pronounced.
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**UK Economic Overview: Sterling Remains Resilient**
While US-related dynamics have dominated recent GBP/USD action, the Pound has also found support from relative UK stability.
**UK Economic Snapshot:**
– **GDP Growth:** The UK economy narrowly avoided recession
Read more on GBP/USD trading.