Pound edges lower as UK labor market cools

The British pound has posted slight losses on Tuesday. GBP/USD is down 0.08%, trading at 1.2548 in the European session at the time of writing.

UK job growth slides

The UK labor market continues to show cracks as job growth was sharply lower in today’s employment report. The economy shed 178,000 jobs in the three months to March, after losing 156,000 in the previous report. This was better than the market estimate of a decline of 215,000. The unemployment rate rose to 4.3%, up from 4.2% and matching the market estimate. Wage growth ticked up to 5.7%, compared to the revised 5.6% gain in the previous report.

The job report points to weakness in job growth and higher unemployment, which will support the BoE cutting rates. That could come as soon as June, with the markets pricing in a 50% chance of a June cut. After the report, BoE Chief Economist Huw Pill said that it was “not unreasonable” to expect the central bank to consider lowering rates.

The BoE is eyeing a June cut, but will want to see that inflation continues to downtrend towards the 2% target. That means that next week’s inflation report will be a key factor in the rate decision.

Inflation, inflation, inflation. That is what the Fed is focused on and the US releases the Producer Price index today and CPI on Wednesday. PPI is expected to remain unchanged at 2.4% in April while CPI is projected to ease to 3.6%, down from 3.8% in April. The Fed has delayed plans to cut rates but a drop in this week’s inflation releases would boost the likelihood of a rate cut in September.

GBP/USD Technical

• GBP/USD is testing support at 1.2547. Below, there is support at 1.2526
• 1.2581and 1.2602 are the next resistance lines

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.