**GBP/USD Recovers from May Lows as US Jobs Miss Sparks Dollar Selloff**
*by TradingNews.com Staff Writer, based on reporting at tradingnews.com*
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The British Pound staged a notable recovery against the US Dollar on Friday, bouncing from its weakest levels seen in May as disappointing US labor market data weighed sharply on the greenback. This reversal follows a week dominated by risk aversion, shifting sentiment around central bank actions, and market jitters about growth prospects on both sides of the Atlantic.
This article examines the key drivers behind the GBP/USD upturn, unpacks the implications of the latest US employment report, analyzes evolving positions among major institutions, and considers where the pair may head next.
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## US Labor Market Stumbles: Nonfarm Payrolls Disappoint
The main catalyst for the GBP/USD rebound was an underwhelming US nonfarm payrolls release.
– **Headline May Payrolls:** The US economy added 175,000 jobs, falling well short of the consensus estimate around 238,000. This was the weakest print in six months.
– **Unemployment Rate:** Ticked up to 3.9% from 3.8%, defying expectations for stability.
– **Wage Growth:** Average hourly earnings climbed by 3.9% year-on-year, lower than the 4.0% forecast, with a flat monthly reading.
These numbers immediately hit the US Dollar. The weaker employment gain and cooling wage pressures reinforced the narrative that the labor market is losing some momentum after a string of strong data in earlier months. This finding was particularly impactful given that Federal Reserve officials have tied future interest rate decisions to incoming economic data, especially on jobs and price growth.
### Why Did the Market React So Sharply?
The US Dollar has been supported for much of 2024 by:
– **Resilient US Growth:** A robust labor market, solid consumer spending, and above-target inflation data fueled expectations that Fed rate cuts would be delayed.
– **Yield Differentials:** The US offers some of the highest policy rates among G10 economies, drawing global money.
– **Safe Haven Flow:** Persistent uncertainty around geopolitics and global growth prompted flows into the Dollar.
Friday’s softer jobs data put cracks in the story of labor market invulnerability and revived hopes that the Federal Reserve might begin reducing rates sooner than previously believed.
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## GBP/USD: Technical Recovery Unfolds
The pound saw intense selling through the earlier part of May. Stubborn UK inflation, tepid economic output, and political jitters all weighed on sterling, pushing GBP/USD to a monthly low near 1.2300. The currency then staged a vigorous rally in response to the weaker-than-expected US jobs report:
– **Intraday Bounce:** GBP/USD surged from as low as 1.2300 to test resistance above 1.2500, regaining nearly all ground lost during the prior week.
– **Short Covering:** Bears rushed to exit positions, fueling the sharp upward move.
– **Dollar Outflows:** The broader Dollar index tumbled, further supporting majors like GBP.
### Key Chart Levels
Technically, market participants are watching several important price barriers:
– **Support:** Initial support remains around the 1.2300-1.2350 band, which has acted as a major floor since late April.
– **Resistance:** Immediate resistance appears at 1.2540, with further hurdles at the 1.2600 psychological mark and 50-day moving average.
– **Momentum:** Growing trading volumes and bullish momentum suggest additional upside may be possible if Dollar weakness persists.
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## What This Means for Central Bank Outlook
Friday’s moves dramatically shifted how traders are thinking about rate policy.
### Federal Reserve: Opening the Door to Rate Cuts?
Prior to the jobs report, the Fed was widely expected to remain on hold through most of 2024, perhaps delivering only one cut late in the year, if any.
Read more on GBP/USD trading.