**GBP/USD Recovers from May Low as US Labor Miss Sends Dollar Lower**
*Credit: Trading News, original reporting by TradingNews.com*
The GBP/USD currency pair has shown significant recovery after stumbling to its lowest level in May, rebounding as unexpectedly weak US labor data put pressure on the US dollar. The shift in underlying trends underscores how sensitive major currency pairs remain to macroeconomic releases, especially those concerning employment in the world’s largest economy.
**Key Takeaways:**
– GBP/USD rebounded from monthly lows after disappointing US labor figures
– US dollar weakened across major pairs, driven by increased bets on Fed rate cuts
– UK economic indicators remained mixed, but sterling found support on US data
– Market participants eye upcoming US CPI data and FOMC policy decisions
### The US Labor Miss: Catalyzing Dollar Weakness
The catalyst for the reversal in GBP/USD came from the latest US employment report. According to data released by the US Bureau of Labor Statistics for the month of May, Non-Farm Payrolls (NFP) rose by 175,000, a sharp disappointment versus the consensus forecast near 240,000. Furthermore, the unemployment rate ticked up to 3.9 percent from 3.8 percent in April, while average hourly earnings grew at a slower pace than expected.
**Why Did the Dollar Fall?**
– Lower-than-expected NFP numbers suggest cooling momentum in the US labor market
– Rising unemployment introduces new concerns about future economic strength
– Average wages rose by only 0.2 percent (vs. 0.3 percent expected), tempering inflation expectations
– Traders recalibrated expectations for US Federal Reserve monetary policy, now predicting earlier and more aggressive rate cuts
Heading into the NFP release, positioning in the FX markets was tentative. However, dashed expectations unleashed a flurry of dollar selling as traders quickly moved to price in more dovish policy action from the Fed.
### GBP/USD Technical Recovery
Prior to the data, GBP/USD struggled near the 1.2200 handle, revisiting levels last seen at the beginning of May and threatening to breach key support. The absence of strong UK domestic data meant that the pair’s direction was highly dependent on external drivers.
**Technical Analysis Highlights:**
– GBP/USD rebounded sharply post-labor report, advancing above 1.2400
– Next resistance zone: 1.2500, followed by 1.2550-1.2580 area
– Support is now seen at 1.2370, followed by 1.2300
– RSI (Relative Strength Index) moved away from oversold territory on the daily chart, confirming the momentum shift
The recovery was driven not so much by inherent sterling strength but by the abrupt reversal in US dollar sentiment.
### UK Economic Backdrop: Mixed Signals
While the focus was squarely on US data, the UK economic context remains important for GBP/USD traders. Recent releases have painted a mixed picture:
– **GDP and Growth**: UK GDP has shown signs of improvement, narrowly avoiding a technical recession late last year, but growth remains sluggish. The Bank of England continues to warn about limited upside in economic activity.
– **Inflation Dynamics**: Inflation in the UK, though falling from double-digit levels seen in 2022, remains above the BoE’s 2 percent target. However, recent CPI and wage data hint at a gradual moderation.
– **Bank of England Policy**: The BoE has adopted a cautious approach, balancing the risk of sticky inflation against the need to support a fragile recovery. Rate cuts are being priced in for later this year, but timing remains uncertain.
This uneven domestic backdrop has left GBP/USD vulnerable to external shocks, as evidenced by the sharp response to US data.
### The Fed’s Rate Path: Market Repricing in Action
The US labor miss forced market participants to reassess the timing and extent of future Federal Reserve rate
Read more on GBP/USD trading.