GBP/USD higher with eye on employment report

The British pound is slightly higher on Monday. GBP/USD is up 0.20%, trading at 1.2549 in the European session at the time of writing.

UK job growth expected to slide

The UK labor market has held up well despite high interest rates but cracks have appeared and Tuesday’s job report is expected to be soft. Employment change is expected to slide by 215,000 in the three months to March, after declining by 156,000 in the previous release.UK wage growth including bonuses is forecast to fall to 5.3%, down from 5.6% and the unemployment rate is expected to creep up to 4.3%, up from 4.2%.

The Bank of England will be keeping a close eye on Tuesday’s employment report. A decline in employment and wage growth will indicate that the labor market continues to cool down which could complicate the BoE’s plans to lower interest rates.

The UK ended last week on a high note, as GDP grew 0.6% q/q in the first quarter, higher than the 0.4% market estimate. The stronger data still left a question mark about the central bank’s rate path, as the market pricing of a rate cut in June is around 48%. BoE Governor was non-committal about a June hike at his press conference at last week’s policy meeting. Still, Bailey didn’t rule out a June hike and said that he was “optimistic that things are moving in the right direction”

In the US, the University of Michigan consumer confidence index fell to 67.4 in May, compared to 77.2 in April and shy of the market estimate of 76.2. One-year inflation expectations rose from 3.2% to 3.5%, which indicates that consumers are less confident about inflation receding.

GBP/USD Technical

• GBP/USD tested support at 1.2522 earlier. Below, there is support at 1.2449
• 1.2597 and 1.2680 are the next resistance lines

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