**GBP/USD Recovers from May Low as US Labor Data Miss Sends Dollar Lower**
*Original reporting by John Williams, TradingNews.com*
The GBP/USD currency pair rebounded strongly from its lowest levels of May after the latest US labor market data missed expectations, prompting a sharp pullback in the US dollar and reigniting volatility across the foreign exchange markets. The disappointing data set has revived speculation that the Federal Reserve may consider monetary easing sooner than previously anticipated, introducing a new round of uncertainty for dollar bulls and providing temporary relief for major competitors such as Sterling.
## US Non-Farm Payrolls: Disappointing the Market
The key catalyst for Thursday’s price movement was the US Labor Department’s latest non-farm payrolls report. According to the data, the US economy added 175,000 jobs in May, falling short of the consensus estimate of 195,000. The unemployment rate edged up slightly to 3.7 percent from 3.5 percent, while wage growth also moderated, with average hourly earnings rising just 0.2 percent month-over-month. This underwhelming set of figures came as a surprise to markets that had grown accustomed to robust jobs growth and persistent wage pressures.
– **Key highlights from the US labor report:**
– Non-farm payrolls: 175,000 (vs. expected 195,000)
– Unemployment rate: 3.7 percent (up from 3.5 percent)
– Average hourly earnings: +0.2 percent MoM (vs. +0.3 percent expected)
– Participation rate: 62.7 percent (unchanged)
As a direct reaction, the US dollar index (DXY) fell by more than 0.7 percent in the hours after the report, registering its sharpest one-day decline in over a month. The yield on the benchmark 10-year US Treasury note also dropped from recent highs, further weighing on dollar sentiment.
## Sterling Finds Relief after Recent Struggles
The British pound had been under consistent selling pressure throughout May, dropping as low as 1.2280 against the greenback prior to the US jobs release. A combination of persistent inflation concerns, mixed signals from the Bank of England, and doubts about the durability of the UK’s post-pandemic recovery had conspired to weaken sterling. The disappointing US payroll numbers, however, offered GBP/USD the reprieve it needed, and the currency surged over a full cent higher in the immediate aftermath, peaking near 1.2425 before paring gains.
– **Key factors influencing sterling prior to the rebound:**
– Concerns over stubborn UK inflation, especially in services and food costs
– A dovish tilt from several Bank of England policymakers
– Weaker-than-expected UK GDP growth for Q1 2024
– Ongoing Brexit trade frictions and political volatility
Despite the bounce in GBP/USD, analysts at TradingNews.com caution that sterling’s fundamental backdrop remains fragile. The Bank of England has been sending cautious signals regarding further rate hikes, expressing unease about stalling economic momentum and deteriorating business investment amid global headwinds. Meanwhile, sticky core inflation and wage growth suggest that price pressures might remain resilient, complicating the BoE’s task of striking the right policy balance.
## Why the Dollar Reacted Sharply
The greenback’s reaction to the labor report underscores just how sensitive the currency has become to US data prints in 2024. Having rallied throughout the first four months of the year on the back of safe-haven demand and a consistently hawkish Federal Reserve narrative, the dollar entered May looking overbought against a basket of majors. Growing speculation that monetary policy at the Federal Open Market Committee (FOMC) could soon pivot dovish had already begun to weigh on sentiment.
– **Factors behind the dollar’s sharp pullback:**
– The jobs miss represented the first meaningful US data disappointment since February
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