British Pound declines below 1.3550 on soft UK labour figures, traders brace for CPI data
- GBP/USD softens to near 1.3535 in Wednesday’s early Asian session.
- The UK Unemployment Rate held steady at 4.9% in June, missing the estimates; Wage growth slowed during the same period.
- Traders walked back expectations of a near-term Fed rate hike.
The GBP/USD pair loses ground to around 1.3535 during the early Asian trading hours on Wednesday. The British Pound (GBP) weakens against the US Dollar (USD) amid disappointing UK labour data. Traders will closely watch the release of the UK Consumer Price Index (CPI) inflation data, which is due later on Wednesday.
Data released by the Office for National Statistics showed on Tuesday that the UK Unemployment Rate steadied at 4.9% in the three months to June. The figure came in above the market consensus of 4.8%.
Additionally, the Average Earnings Including Bonus fell to 4.1% in the three months to June, down from 4.4% in the three months to May. Some economists suggested the pay slowdown could deter the Bank of England (BoE) from raising interest rates this year.
Money market pricing shows City economists project one BoE rate hike by the end of the year, which would lift the Bank rate from 3.75% to 4.0%.
“Ongoing weakness in private sector hiring and wage growth suggests the bar is still relatively high for a rate hike in 2026, barring a severe and prolonged spike in energy prices,” said James Smith, a developed markets economist at the Dutch bank ING.
On the other hand, easing expectations of a US interest rate hike next month could weigh on the Greenback and cap the downside for the major pair. Data showed last week that US Retail Sales dropped in July for the first time in nine months, following unexpected job losses last month and tame CPI inflation figures.
Traders expect a 35% chance of a rate hike at the Federal Reserve’s (Fed) September meeting, compared to 47% a month earlier, according to the CME FedWatch tool.
Sterling eases as UK labour data disappoints but underperforms little versus peers
Strategists at Scotiabank observe that “Sterling is a little softer on the session,” noting that the currency’s pullback has been modest and “losses are marginal and more or less in line with its core European peers.” They add that the latest “UK employment data released earlier was, however, disappointing,” with weaker labour-market signals failing to translate into a more pronounced divergence for GBP against the broader European complex.
Technical Analysis: GBP/USD maintains a constructive bias in the near term
In the daily chart, GBP/USD holds a bullish near-term bias as spot remains above both the 100-day simple moving average (SMA) and the Bollinger Bands’ 20-period middle SMA, keeping the recent uptrend supported. The Relative Strength Index (14) at 60.8 sits in bullish territory but shy of overbought, suggesting constructive momentum that could favour further gains while price stays anchored above these underlying averages.
On the topside, immediate resistance emerges at the upper Bollinger Band around 1.3615, where buyers may hesitate on approach. On the downside, initial support is provided by the Bollinger middle band at 1.3450, followed by the 100-day SMA at 1.3420, with a deeper cushion at the lower Bollinger band near 1.3285. As long as GBP/USD defends this stacked support area, the technical structure would continue to favour dip-buying over a broader reversal.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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