February’s jobs report presented a mixed picture as 275k new roles were created, surpassing market expectations. However, a significant revision to January’s figures, from 353k to 229k, tempered this positive news. The rise in the unemployment rate to 3.9% and a dip in average hourly earnings growth further signalled a weakening labour market. These developments have bolstered expectations for a Fed rate cut in June.
The dollar’s reaction was notably negative, falling to key support levels, including the 61.8% Fibonacci retracement around 102.50. The weakness was broad, with the USD/JPY dropping to 146.50 and contributing to major currencies and gold gains. The GBP/USD notably extended its rally, reaching highs not seen since July 2023, driven by the dollar’s downturn and speculation ahead of the jobs report.
The GBP/USD pair has demonstrated strength, breaking above several resistance levels and eyeing further gains. Key levels for potential dip-buying include 1.2828 and 1.2800, with the path of least resistance pointing upwards. The absence of immediate resistance until the July high of 1.3140 highlights the bullish sentiment surrounding the pair, especially in light of recent developments.
The jobs report indicates a broader trend of disappointing US macroeconomic data. This contrasts sharply with more encouraging developments in the Eurozone and China. This divergence has contributed to the dollar’s weakness, narrowing the gap between European and US real rates. Significant data releases, including the UK Average Earnings Index and the US CPI, will be crucial in determining the short-term direction of the GBP/USD. Strong UK wage growth could push the pair towards the 1.30 level, while US inflation data will be key for the dollar’s trajectory.
Overall, the mixed-to-weak jobs report and broader macroeconomic trends suggest a challenging environment for the dollar and provide a potentially bullish backdrop for the GBP/USD. Investors will closely monitor upcoming data releases to gauge potential movements in these markets.
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