**GBP/USD Recovers from May Low as US Labor Miss Sends Dollar Lower**
*By TradingNews.com Staff Writer*
After enduring several sessions of persistent weakness, the British Pound (GBP) has found some relief against the US Dollar (USD), recovering from its lowest level seen in May. This rebound comes as US economic data disappointed expectations, lending support to GBP/USD by pushing the Dollar broadly lower. With multiple factors at play—including US labor market softness, evolving central bank policies, and upcoming UK data—the currency pair’s near-term direction remains hotly debated.
Below is a comprehensive breakdown of how GBP/USD has reacted to recent events, what the factors driving the move are, and what traders should keep in mind for the days ahead.
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**Recent Price Action Overview**
– GBP/USD reached a May low early in the week, triggering concerns about further downside
– The pair rebounded sharply after the latest US labor market report came in weaker than forecast
– Sterling’s immediate recovery suggests the Dollar’s earlier strength may have peaked, at least temporarily
**US Labor Market Data Misses Estimates**
The most significant catalyst for GBP/USD’s recovery has been the disappointing US labor market report.
– The US ADP Employment Change for May showed much lower job creation than economists projected
– Weekly jobless claims climbed above expectations, indicating more Americans filed for unemployment benefits
– The softer print fueled speculation that US economic momentum is fading in the crucial jobs sector
Investors were quick to reprice the outlook for Federal Reserve interest rate policy in light of these figures. Expectations for further US rate hikes subsided, causing a broad-based selloff in the Dollar.
**Market Expectations on Fed Policy Shift**
The reversal in Dollar fortunes traces directly back to renewed uncertainty about future rate hikes from the Federal Reserve.
– Before the labor data, markets viewed another Fed hike as likely in coming months, underpinning Dollar strength
– Weaker labor numbers led traders to believe the Fed may pause, or even consider rate cuts, sooner than anticipated
This repricing of risk supported GBP/USD and other major Dollar pairs as investors looked for alternatives to the greenback.
**UK Data and Bank of England Outlook**
Across the Atlantic, UK economic data and Bank of England (BoE) commentary have remained crucial for Sterling’s tone.
– UK inflation remains higher than in the US, keeping the BoE on a more hawkish stance than some peers
– Recent UK wage growth and employment data have proven resilient, allowing the BoE some flexibility in its policy path
These factors have helped the Pound withstand external shocks, even when global risk appetite deteriorates.
**Technical Analysis: Signs Favoring a GBP/USD Bottom**
From a technical analysis perspective, the GBP/USD recovery from its May low suggests that support just below 1.23 is holding.
– The May low coincided with a previous area of support from March and April trading sessions
– A bullish reversal candle formed on daily charts after the US labor data, hinting at further upside potential
– Key resistance for bulls lies near the psychological 1.25 mark and the 50-day moving average above it
Should buyers consolidate this recovery, a rally toward 1.26 is possible. On the downside, a break below the May low would open the door toward 1.22 and possibly lower.
**GBP/USD Drivers in the Coming Sessions**
Several factors may influence Sterling’s trajectory versus the Dollar in the days ahead:
**1. US Economic Calendar**
– Nonfarm Payrolls: The official US jobs report remains the primary driver for near-term Dollar swings
– Inflation Data: US CPI and PPI figures will shape the Federal Reserve outlook and hence the USD
– Fed Commentary: Any new signals on rates from Fed officials will be closely watched by traders
**2. UK Economic Releases**
– GDP: The UK’s growth performance for the first quarter could boost or dent optimism about the economy
– Labor Data: Wage growth and unemployment releases will impact Bo
Read more on GBP/USD trading.