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The British Pound dips against the US Dollar as traders await May’s US CPI report.
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Weaker UK employment figures strengthen expectations for a Bank of England rate cut in August.
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US-China trade tensions ease following a two-day negotiation round in London.
The Pound Sterling (GBP) edges lower to around 1.3480 against the US Dollar (USD) during late European trading hours on Wednesday, with modest selling pressure building as markets await the latest US Consumer Price Index (CPI) data for May, due at 12:30 GMT.
The US Dollar Index (DXY), which gauges the Greenback’s performance against a basket of six major currencies, hovers near 99.00 as traders remain cautious ahead of key economic data that could shape the Federal Reserve’s (Fed) monetary policy path.
May’s CPI report is expected to show a rise in annual headline inflation to 2.5% from April’s 2.3%, while the core CPI—excluding food and energy—is forecast to accelerate to 2.9% from 2.8%. On a monthly basis, headline and core inflation are seen increasing by 0.2% and 0.3%, respectively.
A hotter-than-expected inflation print could reinforce the Fed’s stance on keeping interest rates elevated for an extended period, particularly as policymakers seek clarity on the economic impact of President Trump’s renewed tariff strategy. Even if inflation data disappoints, Fed officials are likely to resist calls for early rate cuts, citing concerns about unanchored inflation expectations under the Trump administration.
Meanwhile, geopolitical sentiment has improved slightly as US-China trade tensions ease. A positive tone followed a two-day meeting in London between trade representatives, with US Commerce Secretary Howard Lutnick expressing optimism that both sides are prepared to ease export restrictions—signaling a step toward reduced economic friction between the world’s two largest economies.
Daily Market Movers: Pound Sterling Trades Cautiously Amid Weak UK Jobs Data
- The Pound Sterling trades cautiously against major peers on Wednesday, struggling to regain the ground lost during Tuesday’s session. The British currency came under significant pressure after the UK Office for National Statistics (ONS) released a disappointing labor market report for the three months to April.
- The data revealed signs of stress in the UK job market, partly attributed to Chancellor Rachel Reeves' decision to increase employers’ social security contributions from 13.8% to 15% starting in April. The Unemployment Rate rose to 4.6%, the highest since July 2021, while job vacancies declined and wage growth slowed, signaling weakening labor demand.
- This soft employment data has fueled market speculation that the Bank of England (BoE) could cut interest rates sooner and more aggressively than previously anticipated. HSBC analysts noted that “weak jobs and slower pay growth may tip the balance in favour of an August cut.”
- Looking ahead, investors are turning their attention to Thursday’s release of key UK economic indicators, including monthly Gross Domestic Product (GDP) and factory output data for April. The UK economy is expected to have contracted by 0.1%, reversing March’s 0.2% growth. Both manufacturing and industrial production are also projected to show further monthly declines.
Technical Analysis: GBP/USD Faces Resistance Above 1.3500
The Pound Sterling edges lower toward the 20-day Exponential Moving Average (EMA), currently near 1.3467, reflecting uncertainty in the near-term outlook. GBP/USD came under pressure after failing to retest its three-year high of 1.3617 earlier this week.
The 14-day Relative Strength Index (RSI) has pulled back sharply toward the neutral 50 level, signaling waning bullish momentum and a capped upside.
To the upside, the 1.3617 multi-year high remains a key resistance barrier. On the downside, the May 15 low at 1.3258 serves as a crucial support zone if bearish pressure intensifies.
