**GBP/USD Forecast: Pound Surges Against Dollar as US Jobs Slow Sharply**
*Adapted and expanded from original analysis by Currency News | August 1, 2025*
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The British Pound Sterling (GBP) has made significant gains against the US Dollar (USD), with the GBP/USD exchange rate rallying following the unexpected slowdown in US jobs growth. This latest bout of currency volatility underscores the crucial interplay between economic data, central bank policy expectations, and global risk sentiment. With FX markets recalibrating after a slew of influential economic releases, a detailed examination of the drivers, implications, and forecasts for the GBP/USD pair is warranted.
## US Jobs Data Disappoints, Dollar Weakens
The primary catalyst behind the recent surge in the Pound Dollar rate was the sharp cooling in US non-farm payrolls reported for July. Economists had expected robust job creation in the world’s largest economy, but the reality diverged starkly from projections:
– **US Non-Farm Payrolls (July):** Increase of 87,000 jobs (forecast: 139,000)
– **Unemployment Rate:** Ticked up to 4.2 percent (previous: 4.0 percent)
– **Average Hourly Earnings:** Rose 0.2 percent month-on-month (market forecast: 0.3 percent)
The weak jobs data cast doubt over the resilience of the US labour market. As many analysts observed, job growth has trended steadily lower over recent months, aligning more closely with average “pre-pandemic” expansion rates after the exceptional gains seen during the post-pandemic rebound. With underlying indicators like participation and wage growth also showing tentative signals of moderation, the Federal Reserve’s “higher for longer” interest rate stance is now under scrutiny.
### Dollar Slides as Rate Cut Expectations Rise
Currency markets acted swiftly in response. The Dollar Index (DXY), a measure of the USD’s performance against a basket of major global currencies, slipped to its lowest levels since April as investors rushed to price in a greater probability of Federal Reserve rate cuts in the coming quarters.
– **Fed Funds Futures** now imply:
– An 87 percent chance of a September rate cut
– Two rate cuts fully priced in by the end of 2025
Treasury yields fell, with the benchmark 10-year yield briefly dropping below 4.00 percent, and risk assets including equities and emerging market currencies benefited.
### Market Reaction Summary:
– US Dollar sharp decline versus peers, notably GBP, EUR, and JPY.
– Gold prices surged, reflecting hedging demand as real yields dipped.
– US stock indices rose to new highs as rate-sensitive growth sectors attracted flows.
## UK Economic Backdrop: Resilience Supports Sterling
While the US economic story took center stage, developments in the United Kingdom have lent support to Sterling, creating a favorable backdrop for the GBP/USD pair.
### Stronger-than-Expected UK GDP Growth
Recent GDP figures for the second quarter revealed that the UK economy expanded at a rate of 0.3 percent, outstripping consensus expectations of 0.1 percent. Growth was observed across the services and construction sectors, while consumer activity proved more robust than feared given the lingering effects of elevated interest rates and the cost-of-living squeeze.
The upbeat GDP numbers follow a run of optimistic data on:
– Retail spending
– Job creation
– Business investment
### Bank of England: Cautious Optimism with Hawkish Undercurrents
The Bank of England (BoE) has maintained a guarded policy stance. At the August Monetary Policy Committee (MPC) meeting, policymakers held the key Bank Rate steady at 5.25 percent by a margin of 7-2, but the language of the statement has left the door open for future tightening should inflation risks resurface.
– **BoE Governor Andrew Bailey** noted:
– Some “encouraging signs” on inflation coming down
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