GBP/USD Slides as Robust US Jobs Data Dampens Expectations of Fed Rate Cut

• Sterling poised for over 0.80% weekly gain, capitalizing on early week US Dollar weakness.
• US job growth in May surpasses expectations with 139K new jobs, supporting the Federal Reserve’s cautious approach on rate adjustments.
• US Dollar Index (DXY) experiences resurgence, climbing 0.58% to 99.28, marking a two-day peak.

During the North American trading session, the GBP/USD pair experienced a decline, dropping over 0.30% following the robust US employment report which affirmed the strength of the US economy. The pair was noted at 1.3526 after reaching a daily high of 1.3586.

Pound dips below 1.3550 as US NFP data surpasses forecasts, boosting the Dollar and tempering rate cut expectations

May’s US Nonfarm Payrolls exceeded the anticipated 130K by posting 139K jobs, although this was a slight decrease from April’s revised 147K. Despite a softening job market, the figures exceeded expectations, reducing speculation about potential US Federal Reserve rate cuts in 2025.

The unemployment rate held steady at 4.2%, with the Federal Government reducing its workforce by 10,000 positions last month.

With a limited economic calendar in the UK, GBP/USD traders focused primarily on US developments. Nevertheless, Sterling is on track to secure a weekly gain exceeding 0.80%, driven by widespread weakness in the US Dollar.

However, the Dollar has regained some momentum, as evidenced by the rise in the US Dollar Index (DXY). This index, which measures the US Dollar against a basket of six major currencies, has risen 0.58% to 99.28, reaching its highest level in two days.

Looking ahead to next week, the UK economic calendar will highlight job data and GDP figures for April. In the US, the agenda includes the latest Consumer Price Index (CPI), followed by the Producer Price Index (PPI) and the University of Michigan Consumer Sentiment Index.

GBP/USD Price Forecast: Technical Analysis

The upward trend for GBP/USD remains intact as buyers recently tested the 20-day Simple Moving Average (SMA) at 1.3509. If this support level holds, the pair is likely to continue its upward trajectory, characterized by a series of higher highs and lows, suggesting potential further gains.

However, momentum indicators such as the Relative Strength Index (RSI) are pointing lower, indicating that sellers are gaining strength.

If GBP/USD maintains above the 1.3500 threshold, it could pave the way for a retest of today’s high at 1.3584, and potentially reach the year-to-date high at 1.3616. Conversely, a daily close below 1.35 could trigger a drop towards the April 28 swing high, now acting as support at 1.3443, before potentially testing the 1.34 level.