Pound rebounds as U.S. adds just 57,000 jobs in June

Published 6 days ago 71 sources

The British pound clawed back ground against the dollar on Thursday, rising toward $1.334 after the June U.S. jobs report came in far weaker than expected, undercutting the hawkish case for a near-term Federal Reserve rate hike and offering a reprieve for a currency that had been languishing near seven-month lows.

Nonfarm payrolls increased by just 57,000 in June, well below the 110,000 consensus forecast, while the prior month was revised down to 129,000, the Bureau of Labor Statistics reported. The unemployment rate ticked down to 4.2%, though the decline owed largely to a drop in the labor force participation rate rather than robust hiring. reuters.com cnbc.com bls.gov

Pound rebounds as U.S. adds just 57,000 jobs in June

A Hawkish Fed Meets Soft Data

The soft reading arrived at a pivotal moment. Sterling had been under pressure for weeks as the gap between U.S. and UK monetary policy widened. Fed Chairman Kevin Warsh, speaking at the ECB’s annual Sintra forum on Wednesday, reiterated his commitment to the central bank’s 2% inflation target and vowed to “disappoint” anyone expecting loose policy. But he also acknowledged that “inflation risks have come down” since the Fed’s June meeting, when nine of 19 policymakers projected a rate hike before year-end. reuters.com reuters.com bloomberg.com

Markets had been pricing in roughly an 80% chance of at least one rate increase by December, with fed funds futures pointing to September as the earliest likely move. Thursday’s weak payrolls print could temper that timeline, and GBP/USD jumped in early trading as the dollar softened. cnbc.com tradingkey.com mitrade.com investopedia.com

Bailey Strikes a Cautious Tone

On the other side of the Atlantic, Bank of England Governor Andrew Bailey used the same Sintra gathering to emphasize the UK economy’s fragility. “We have got quite a soft economy,” he told CNBC on Monday, noting a “small output gap” and describing the oil-price shock from the Middle East conflict as “frustrating” for policymakers. On Wednesday, he said rate cuts remained “off the table” for now, even as the inflationary impulse from higher energy prices appeared to be fading. pressroom.versantmedia.com bloomberg.com reuters.com

The BoE has held its benchmark rate at 3.75% for four consecutive meetings. UK inflation stood at 2.8% in May but is expected to rise toward 3.2% later this year due to lagged energy effects. Financial markets see about a 75% chance of a single quarter-point hike, though some economists expect cuts to resume once the energy shock passes. reuters.com global.morningstar.com bankofengland.co.uk reuters.com

Cross Currents: Euro Weakness and UK Politics

Sterling’s weakness against the dollar has masked strength elsewhere. The pound hit a one-year high against the euro on Wednesday, climbing to €1.1662 after cooler-than-expected eurozone inflation data weighed on the single currency. poundsterlinglive.com currencynews.co.uk

Meanwhile, investors are monitoring Britain’s political transition. Keir Starmer resigned as Labour leader, and Andy Burnham, the frontrunner to replace him, has sought to calm markets by pledging adherence to existing fiscal rules. The Labour leadership ballot is not expected to conclude until later in the summer, leaving a period of uncertainty that could weigh on sterling if fiscal commitments come into question. tradingkey.com labour.org.uk time.com