**GBP/USD Price Forecast: Pound Sterling Jumps to 1.3512 on Weak US Jobs Data and Shutdown Fears**
*By TradingNews.com Staff*
The British Pound surged against the US Dollar, climbing to a recent high of 1.3512. This upward momentum for GBP/USD came in the wake of disappointing US jobs data and growing fears over a potential federal government shutdown that has cast a shadow over the Dollar’s recent rally. As investors digested a series of key developments, the market outlook for the pound-dollar pair shifted, offering fresh trading opportunities and risks for Forex traders.
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## Weak US Employment Data Triggers USD Sell-off
A central factor behind the Pound’s sharp appreciation was the release of US non-farm payrolls data, which fell short of market expectations. The US economy added fewer jobs than anticipated last month, indicating potential cracks in the labor market recovery. The Labor Department’s report not only revealed slower hiring but also revised previous months’ gains lower, underscoring persistent concerns about the pace and sustainability of US economic growth.
Key points from the US jobs data:
– **Non-farm payrolls missed estimates:** Actual job additions were notably below consensus forecasts.
– **Downward revisions:** Job gains from previous months were adjusted downward, exacerbating concerns.
– **Wage growth stagnated:** Average hourly earnings showed muted growth, suggesting limited inflationary pressure.
– **Unemployment rate ticked higher:** The rate inched up, reflecting the ongoing challenges businesses face.
These negative signals weighed heavily on the US Dollar across majors, as traders re-evaluated the likelihood of further Federal Reserve tightening. The cooling labor market has moderated expectations for interest rate hikes, prompting a slide in Treasury yields and sapping demand for the greenback.
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## Looming US Government Shutdown Adds to Dollar’s Woes
As if weak economic data was not enough, investors grew increasingly nervous about the prospects of a US government shutdown. Political gridlock in Washington has heightened the risk that Congress will fail to authorize federal spending, potentially halting a wide swathe of government operations.
Implications of a US government shutdown:
– **Economic disruption:** A shutdown could see hundreds of thousands of federal workers furloughed and important services suspended.
– **Consumer and business sentiment:** Confidence may suffer, possibly denting consumer spending and investment.
– **Credit risk:** Repeated shutdowns can erode foreign trust in US fiscal management.
– **Dollar vulnerability:** As the world’s reserve currency, the greenback often declines during episodes of self-inflicted US fiscal uncertainty.
The dual impact of tepid economic data and political uncertainty triggered risk aversion, with traders scrambling to adjust their exposure. The Dollar, which had recently benefited from its safe-haven status, rapidly ceded gains amid doubts about economic and fiscal stability.
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## Pound Sterling Finds Support: Key Drivers
Against this backdrop, the Pound Sterling took advantage of Dollar softness, recording impressive gains. While some of the move was driven by US-specific weakness, there were also supportive factors for the British currency.
### 1. Improving Post-Brexit Trade Relations
Recent signals from UK and EU officials suggest progress is being made on several outstanding post-Brexit trade issues, particularly regarding the Northern Ireland Protocol. Sentiment has been boosted by:
– **Reduced risks of a trade war:** Rhetoric has softened on both sides, lessening the specter of retaliatory tariffs.
– **Potential for smoother trade:** A breakthrough on the protocol could facilitate more fluid UK-EU trade.
– **Market relief:** Any sign that Brexit-related uncertainty is receding tends to benefit the Pound.
### 2. Bank of England Monetary Policy Outlook
While the US Fed may be turning cautious, the Bank of England (BoE) has signaled its willingness to maintain or even tighten policy if inflation risks persist.
Recent BoE policy highlights:
– **Hawkish undertone:** Several BoE policymakers have warned that inflation remains
Read more on GBP/USD trading.