GBP/USD steady ahead of UK jobs data – MarketPulse

The British pound started the week quietly. GBP/USD is trading at 1.2718 in the North American session at the time of writing, down 0.03% on the day.

UK job growth is expected to shrink

The UK releases its May employment report on Tuesday. UK job growth has been contracting for some time and the trend is expected to continue in May. Job growth is expected to fall by 100,000 in the three months to April, after a drop of 178,000 in the previous release.

The weaker labor market will make it easier for the Bank of England to start cutting rates, but wage growth remains high and that is fueling inflation. Wage growth is expected to rise to 6.1% in the three months to April, up from 6% in the three months to March. Although the overall trend for wages has been downward, it is still uncomfortably high for the BoE. Markets have not fully priced in an initial rate cut until November, although a rate cut in June or August is possible.

On Friday, the US non-farm payrolls report showed that the US labor market is in good shape despite the heavy weight of high interest rates. Non-farm payrolls in May rose to 272,000, beating the market estimate of 185,000 and much stronger than the revised gain of 165,000 in April. Wage growth accelerated in May and was also higher than expected. Surprisingly, the unemployment rate climbed to 4%, up from 3.9% in April and above the market estimate of 3.9%.

The strong jobs numbers have helped cushion the impact on the economy of higher rates and that has kept inflation stubbornly high. According to CME’s MarketWatch, the odds of a quarter-point decline in September have fallen to 46%, down from 51% just a week ago. There is virtually no chance of a rate cut at this week’s meeting.

GBP/USD Technical

  • GBP/USD previously tested 1.2688 in support. Below, there is support at 1.2654
  • 1.2750 and 1.2784 are the next resistance lines

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