Sterling Surges: Dollar Weakness and UK Jobs Data Fuel Rally

The British pound climbed higher on Tuesday, capitalizing on a faltering U.S. dollar and bolstered by UK employment figures that defied grim expectations.

The GBP/USD pair advanced to 1.3497, up from its previous close of 1.3431. During the session, the pair fluctuated, dipping to a low of 1.3420 before peaking at 1.3523. The dollar’s weakness stemmed from U.S. consumer price data signaling a slowdown in inflation, which fueled speculation of an impending Federal Reserve rate cut. The dollar index slid by approximately 0.3%, as markets increasingly priced in a 96% chance of a rate reduction at the Federal Open Market Committee’s September meeting, up from prior estimates of 88%.

Meanwhile, UK labor market data painted a mixed but surprisingly resilient picture. Although the unemployment rate held steady at 4.7% in June, job growth contracted by about 8,000 positions—far less severe than the market’s forecast of a 60,000-job decline. This milder-than-expected slowdown bolstered expectations that the Bank of England might maintain current interest rates, lending further support to the pound.

The combination of a softer dollar and steadier-than-anticipated UK employment figures has given sterling a clear edge, positioning it as a standout performer in Tuesday’s trading session.