Sterling Surges on Weak US Jobs Report, But Analysts Warn of Uncertainty
The British pound has experienced a significant rebound against the US dollar after the weaker-than-expected US jobs report. The September US labor report showed that the economy added just 29,000 jobs, far below the 90,000 forecast.
As a result, the Federal Reserve's odds of raising interest rates in October were cut to around 25% from about 70% previously, causing the dollar to soften and the GBPUSD rate to rebound toward the 1.32 area.
While this move is significant, analysts caution that it may not be a full regime change yet. The pound still has not recovered the ground lost since late August, and its underlying trend remains uncertain.
UK rates have been moving in a way that keeps the pound relevant to yield-focused investors, with 30-year gilt yields hitting 6% on October 1. This has provided some support for sterling, but higher UK yields can also reflect market stress, making the pound's support fragile.
The next test for the rebound will be whether softer US data continues beyond one payrolls report and if the Bank of England validates the pound's rate support ahead of its November meeting.