"Initial Claims, JOLTS, and all the private data are suggesting more softness ahead for the US labor market. and I would bet that NFP catches on at some point" - Spectra Markets.

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The Pound to Dollar exchange rate further reversed some of the week's gains in Good Friday trade after non-farm payrolls figures cast the U.S. labour market in a resilient light but also confirmed a continuing slowdown in employment growth while revealing job losses in some parts of the economy.

Dollars were bought widely but briefly after the Bureau of Labor Statistics said non-farm payroll rose 236,000 in March, down from an upwardly-revised 326k in February but higher than the consensus.

"Yields and the dollar are reacting in orthodox manner as the lean was for something weaker and there was nothing weak about this report," says Brent Donnelly, CEO at Spectra Markets and a veteran trader with a career spent between hedge funds and global banks like Lehman Brothers and HSBC.

"My view is that today’s report is almost 100% noise. Initial Claims, JOLTS, and all the private data are suggesting more softness ahead for the US labor market. and I would bet that NFP catches on at some point," Donnelly writes in Friday's edition of AM/FX.

Economists had on average looked to see only a 228k increase but the better-than-expected March outcome still made for a smaller gain than the 334k average of the last six months while the details of the report revealed job losses in a small number of sectors.

Above: Pound to Dollar rate shown at hourly intervals with other selected exchange rates. Click for closer inspection.

Borrowing costs implied by Federal Funds rate futures edged higher on Friday but the March payroll number and other data released recently led some economists to warn that non-farm payroll growth could fall to as little as 50,000 over the next two months.

"The February and March data make it clear that January’s 353K spike in private payrolls was a fluke, triggered by exceptionally mild winter weather and low snowfall in much of the country," says Ian Shepherdson, chief economist at Pantheon Macroeconomics. 

"The trend in the past six months or so has been about just over 200K. This is about to change, given the clear upturn in jobless claims and the drop in hiring intentions in the NFIB survey," Shepherdson writes in review of the data. 

Friday's report suggested the warehousing and storage industries shed some 12,000 jobs last month, adding to a growing collection of losses seen at companies concerned with retail trade, building materials, garden equipment, home furniture and household electronics, among other items.

Total job losses across those latter segments of the economy were 33,000 in March and are suggestive of some success by the Federal Reserve (Fed) in its effort to bring down inflation by softening up a 'tight' labour market where rising wages are often said to drive corporate price increases.

Average hourly earnings grew by 4.2% over the year to March, down from 4.6% in the year to the end of February, the Bureau of Labor Statistics said on Friday.

Above: Pound to Dollar rate shown at daily intervals with other selected exchange rates. Click for closer inspection.

U.S. Personal Consumption Expenditures inflation remained above the 2% target even after falling to 5% in February, although there has been uncertainty about how much further the Federal Reserve interest rate will rise since the March failure of Silicon Valley Bank.

That and its aftershocks led Fed policymakers to leave their interest rate forecasts unchanged in March, implying only one further increase in the Fed Funds rate for this year, while interest rate market prices are indicating that investors and traders are doubting that this increase would be necessary.

Interest rate markets have shifted abruptly in recent weeks, driving a setback for the Dollar and helping lift the Pound to Dollar rate briefly above the 1.25 handle going into the Easter holiday.

"If we do get a pull back from current highs I would be a buyer on dips in both of [GBP/USD and EUR/USD] as I feel the short term pressure for the USD is still lower from here," says Brad Bechtel, global head of FX at Jefferies.

"Another pair to watch is the AUD/USD as any data-induced dip in that pair will be worth buying into as well. We are mired in a range in this pair with 0.6580 the low end of that range and 0.6800 the recent high," Bechtel writes in Friday market commentary.