**GBP/USD Edges Higher as UK Jobs Data Eases BoE Pressure, Fed Doves Resurface**
*Based on the article by Haresh Menghani, FXStreet*
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The GBP/USD currency pair saw an uptick during Tuesday’s European session, buoyed by soft UK labor market data that reduced prospects for immediate rate hikes from the Bank of England (BoE). Simultaneously, the US Dollar softened as dovish rhetoric from Federal Reserve officials weighed on the greenback. The currency market participants now closely monitor evolving economic conditions in both countries, as central banks balance growth risks with inflation control.
Below is an in-depth analysis of what is driving the GBP/USD pair, including central themes from the FXStreet article, broader market context, and potential technical forecasts.
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## UK Labor Market Softens; BoE Policy Outlook Eases
Recent UK labor data released on Tuesday hinted at a cooling job market. The Office for National Statistics (ONS) reported slightly weaker than expected numbers, signaling that the UK labor market’s resilience might be waning. This shift lessens immediate pressure on the Bank of England to continue with aggressive policy tightening.
**Key highlights from the UK labor release include:**
– **Claimant Count Change:** For June, the claimant count increased, with 32.4K claims versus a revised 11.2K in May. The market consensus expected a lower figure.
– **Unemployment Rate:** The unemployment rate edged up to 4.4% in the three months to May, above the previous reading of 4.2%.
– **Average Earnings:** Total pay including bonuses rose by 5.7% year-on-year, still robust but not accelerating further. Wage growth remains historically elevated relative to inflation targets.
The data collectively painted a picture of decelerating momentum, even as wage growth continues to pose upside risks to inflation. For the BoE, a labor market that begins to show slack is a crucial development, as policymakers weigh up the risks of persistent inflation against the potential harm of overtightening.
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### Implications for Bank of England Policy
The headline figures reinforce expectations that the BoE may adopt a more cautious approach in the coming months. After raising rates consecutively from late 2021, policymakers are now signaling a “data-dependent” outlook, wanting to avoid prematurely stifling economic growth.
**Factors influencing BoE rate decisions:**
– **Easing inflation pressures:** Although inflation remains above the 2% target, it has shown signs of moderating in recent months.
– **Possible wage-price spiral risk:** Strong wage growth could maintain upward pressure on prices, but the recent moderation undercuts this concern.
– **Domestic economic slowdown:** Other UK macroeconomic indicators, including retail sales and manufacturing activity, suggest the recovery is fragile.
Should further labour market data soften, or if wage gains slow, the BoE may pause or even consider future easing, especially if inflation drops closer to target later in the year.
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## US Dollar Retreats Amid Dovish Fed Rhetoric
While UK data drove the initial GBP/USD upside, broad-based US Dollar weakness further powered the move. This softness stemmed from recent dovish speeches by several Federal Reserve officials, who signaled that policy rates may be at or near their peak. A more accommodative Fed could pave the way for lower US interest rates, reducing the Dollar’s yield advantage.
**Key points from the Fed front:**
– **Fed speakers advocate patience:** Multiple Federal Open Market Committee (FOMC) members echoed the need to be “cautious and data-dependent” before making new moves, suggesting an openness to rate cuts if inflation remains subdued.
– **Market pricing shifts:** Futures markets now see increased chances for a rate cut later in the year, as inflation data in recent months have printed largely on target, or even fractionally softer than consensus.
– **US economic data softens:** Recent releases, such as retail sales and
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