By: Swarnalata
Published on: Jun 10, 2025
The pound came under pressure on Tuesday, dipping over 0.4% against the US dollar after the latest UK jobs report signaled a clear softening in the labour market. Sterling (GBPUSD=X) hovered just below the $1.35 mark, marking a pause in its recent rally fueled by a weakened dollar and global market uncertainty.
The April jobs report released by the Office for National Statistics (ONS) showed UK unemployment ticking up to 4.6%, edging past pre-pandemic levels for the first time. Meanwhile, the number of payrolled employees fell by 55,000 from the previous month — a drop of 0.2%.
It’s a telling sign of a cooling labour market, one that could significantly influence future monetary policy decisions by the Bank of England.
The drop in employment and moderation in wage growth may provide some breathing room for inflation, which has been a pressing concern for central bankers. With inflation expected to ease, analysts believe the Bank of England might feel more confident about lowering interest rates further.
“The trend in payrolls has been clear for some time now — even if many have dismissed this,” noted Sanjay Raja, senior economist at Deutsche Bank. “The May payroll data may just be the peak in a long trending run of weaker labour market trends.”
With economic headwinds mounting, these figures could act as a catalyst for rate cuts in the coming months, making borrowing cheaper — but also signaling slower economic activity ahead.
Sterling had enjoyed a relatively strong run recently, buoyed by global volatility, especially in the US, where President Donald Trump’s unpredictable tariff strategies have unsettled markets. Investors had shifted away from the dollar, making room for the pound to appreciate.
But Tuesday’s labour market report brought that trend to a halt. It’s not just the numbers — it's the implication that the UK's economic engine is slowing down, and policymakers might need to pivot once again.
While the pound lost steam, the dollar saw some support. The US Dollar Index (DX.Y.NYB) climbed 0.2%, with investors watching closely as trade talks between US and Chinese officials resumed in London. The discussions focused on export controls, particularly regarding rare earth materials and semiconductors.
According to reports from Reuters, the White House is considering easing restrictions on semiconductor exports in exchange for faster rare earth deliveries from China — a sign of potential de-escalation in trade tensions.
White House adviser Kevin Hassett expressed optimism about the talks, adding fuel to the dollar's mini-rally.
Gold prices lacked clear direction amid the mixed macroeconomic backdrop. After a short-lived safe-haven rally triggered by Trump’s stark “house of cards” comments on the US economy, prices have steadied.
On the commodities front, oil saw gains for the second straight session. Brent crude edged up 0.2% to $66.37 per barrel, while West Texas Intermediate followed suit, trading at $65.41.
The modest rebound comes after Monday’s losses, driven by supply concerns and geopolitical risks, though much of the market's attention remains glued to trade developments and central bank signals.
For forex traders, this week is a critical inflection point. The weak UK employment figures may lead to a more dovish Bank of England, while a potentially stronger dollar — if US-China trade relations thaw — could tilt the GBPUSD pair downward further.
Short-term volatility in the pound is likely, especially as traders digest new data and await more guidance from both the Bank of England and US Federal Reserve. Positioning may shift quickly as rate cut odds are priced into the market.
The near-term outlook for the pound is clouded by uncertainty. If job figures continue to disappoint and wage growth slows further, the Bank of England may have no choice but to pull the trigger on rate cuts.
While lower rates might support consumer borrowing, they also typically weaken a currency. That could mean more downside for the pound unless offset by a broader dollar decline or renewed confidence in the UK economy.
One thing is clear: the jobs report has changed the tone around Sterling.
The pound’s drop on Tuesday isn’t just a reaction to one report — it’s a signal that confidence in the UK’s economic resilience is starting to waver. With unemployment rising, job creation slowing, and wages no longer accelerating, the Bank of England may find itself navigating more difficult terrain in the months ahead.
Currency markets are rarely about single data points, but this one felt different. It raised more questions than answers — and for forex traders, that’s both a risk and an opportunity.
Stay tuned. The pound's story in 2025 is far from over.
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