Pound Sterling rises on strong UK employment data, boosting GBP/USD amid improving economic outlook

The British Pound (GBP) strengthened on Tuesday, edging higher against most major currencies—except the Australian and New Zealand Dollars—following the release of upbeat labor market data in the UK for the three months ending February. According to the Office for National Statistics (ONS), the UK economy added 206,000 new jobs during this period, significantly exceeding the previous figure of 144,000 for the three months ending in January.

The ILO Unemployment Rate remained steady at 4.4%, matching both the market consensus and the prior reading. This improvement in employment figures provides a supportive backdrop for the Pound, although analysts caution that hiring momentum could slow in the coming months. This is due to the government's decision to raise National Insurance (NI) contributions for employers—from 13.8% to 15%—starting in April, as outlined in Chancellor Rache Reeves' Autumn Budget.

In terms of wages, Average Earnings Excluding Bonuses rose by 5.9% year-over-year, slightly below the expected 6%. The previous month’s figure was revised down to 5.8%. Including bonuses, wage growth came in at 5.6%, also underperforming forecasts of 5.7%. This mixed wage data is unlikely to alter expectations that the Bank of England (BoE) may cut interest rates at its upcoming May policy meeting.

Investors are now turning their attention to the UK Consumer Price Index (CPI) data for March, set to be released on Wednesday. The core CPI, which excludes food and energy prices, is expected to hold steady at 3.5%.

Pound Sterling Hits Six-Month High Amid Dollar Weakness

• During European trading hours on Tuesday, the GBP/USD pair surged to a six-month high near the 1.3220 mark. The Pound continues to gain momentum as the US Dollar struggles, undermined by inconsistent trade policies under President Donald Trump. The US Dollar Index (DXY), which measures the USD against a basket of six major currencies, hovered slightly above the three-year low at 99.00.
• Investor confidence in the US Dollar has eroded amid ongoing uncertainty about tariff strategies. While President Trump recently paused reciprocal tariffs for 90 days on most trading partners—excluding China—he has also hinted at temporarily suspending tariffs on imported vehicles and auto parts.
• Speaking on Monday, Trump noted that US automakers need more time to relocate their supply chains domestically. “They’re switching to parts made in Canada, Mexico, and other places, and they need a little bit of time,” he told Bloomberg.
• Meanwhile, growing economic risks linked to trade tensions are adding pressure on the Federal Reserve to consider rate cuts. Fed Governor Christopher Waller indicated support for monetary easing if recession risks outweigh inflation concerns. "If the effects of tariffs on inflation are short-lived, recession risks would be the bigger threat," Waller said.

Technical Analysis: GBP/USD Extends Bullish Run Above 1.3200

The GBP/USD pair has now posted gains for six consecutive trading sessions, rising above the 1.3200 level. The short- and long-term technical outlook remains bullish, with the price trading above all major Exponential Moving Averages (EMAs). The 14-day Relative Strength Index (RSI) shows a V-shaped recovery, climbing from 40.00 to 65.00—suggesting strong upward momentum.

Support is seen near the 61.8% Fibonacci retracement level of 1.2927, which was drawn from the late September high to the mid-January low. On the upside, the three-year high at 1.3430 serves as the next key resistance zone.