- Britain’s labor market surpassed even the most optimistic predictions.
- The UK experienced a decreased unemployment rate.
- Mann emphasized that the BOE should prioritize reducing inflation rather than communication.
Today’s GBP/USD outlook is bullish. Data released on Tuesday revealed that Britain’s labor market surpassed even the most optimistic predictions of economists. Consequently, it has intensified the pressure on the Bank of England to lift interest rates again.
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The Office for National Statistics reported a significant surge in employment and wage growth during the three months leading up to April. Additionally, the unemployment rate fell. As a result of this data, the pound’s value against the dollar increased by approximately one-third of a cent to $1.255.
These figures show that the economy is not slowing down as expected by the BoE. Unfortunately, Britain is experiencing one of the highest inflation rates among major advanced economies.
Elsewhere, BOE’s Catherine Mann stated that central banks, including the BoE, will face challenges in effectively communicating the conclusion of their rate-tightening cycle. Furthermore, she emphasized that they should prioritize reducing inflation rather than excessively worrying about communication.
Following the release of April inflation data, which indicated smaller-than-anticipated declines and larger increases in food prices, services, and certain goods, expectations for UK interest rates surged. However, several economists anticipate the BoE to halt rate increases sooner or, if not, to pause to evaluate the impact of previous hikes.
Jonathan Haskel, another MPC member known for his hawkish stance, expressed in a newspaper article on Monday that the BoE still needed to counter the potential risk of high inflation becoming entrenched.
GBP/USD key events today
All focus will be on the US inflation report coming out later. Investors expect a decrease in headline inflation, while core inflation will likely remain elevated.
GBP/USD technical outlook: Buyers resurface after the 30-SMA support.
The technical bias for GBP/USD is bullish because the price is above the 30-SMA, and the RSI is above 50. Notably, bulls made a new high at the 1.2600 resistance level before the price retreated. The pullback broke below the 1.2550 support level but could not go below the 30-SMA. This indicates a bullish trend.
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The price is bouncing higher from the 30-SMA and is on the brink of exceeding the 1.2550 resistance. Bulls will likely soon retest the 1.2600 resistance level.
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Saqib Iqbal
