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
