A weak June US jobs report knocked the dollar lower on Thursday and lifted GBP/USD toward $1.3360. The payrolls miss prompted traders to reassess their bets on a near-term Federal Reserve rate hike, while easing UK political worry gave the pound an extra push.
The pound rallied against the dollar on Thursday after a soft US labour market report triggered a broad selloff in the greenback. GBP/USD traded near $1.3360, up around 0.6% from the session's opening levels.
Payrolls miss sinks the dollar
The dollar came under heavy pressure after the Bureau of Labor Statistics released its June non-farm payrolls report, which pointed to a marked slowdown in hiring. The US economy added only 57,000 jobs, far below expectations for a gain of roughly 110,000 and the weakest reading in several months.
The report also carried downward revisions to April and May employment, reinforcing concerns that the US labour market is cooling faster than previously believed. As a result, investors reassessed the path for Federal Reserve policy: market pricing for an interest rate increase before the end of the summer fell sharply from around 70% to close to 50% after the release.
Sterling gains as UK political fog clears
The pound also firmed as investors grew more confident that the UK's political transition would prove smoother than feared. With Andy Burnham expected to become the next Prime Minister without a leadership contest, markets kept unwinding the political uncertainty that had weighed on sterling in recent weeks.
Further support came from Burnham's assurances on Labour's existing fiscal framework, with his government pledging to stick to it, including balancing day-to-day spending through tax receipts and reducing debt as a share of GDP over the longer term.
Bailey speech in focus on Friday
Attention now turns to a scheduled speech from Bank of England Governor Andrew Bailey. He struck a relatively hawkish tone earlier in the week, signalling that rate cuts are not under consideration while warning that higher energy costs could yet feed through into inflation. Should he repeat that message, sterling may extend its gains.
The dollar, meanwhile, could see subdued volatility into the weekend, with US markets closed for the Independence Day holiday and trading volumes lighter as a result.
Source: CurrencyNews.co.uk
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