**UK Employment Cools, Pound Edges Higher; US CPI Expected to Tick Higher**
*By Kenny Fisher, MarketPulse*
The forex market opened the week with a cautious tone as global investors eyed crucial economic data and central bank moves that could define the next short-term direction for major currencies. On the heels of cooling UK employment data, the British Pound experienced a modest lift, reflecting scenario-based trading as markets weigh lingering inflation pressures, evolving expectations for central bank actions, and shifts in global risk appetite.
At the same time, the stage is set for a high-impact week in the United States, with the upcoming release of the May Consumer Price Index (CPI) adding urgency as traders calibrate their odds for future Federal Reserve decisions. The currency landscape remains volatile as policymakers on both sides of the Atlantic signal divergent approaches to rate cuts and the path towards price stability.
## UK Employment Data Sends Mixed Signals
On Tuesday, the UK published its latest batch of employment figures, underscoring a further cooling in the labor market that could help relieve some of the Bank of England’s inflationary worries. Headline prints were mixed but leaned dovish:
– The unemployment rate ticked up to 4.4 percent in the three months to April, above the market consensus and previous reading of 4.3 percent.
– Wage growth remained sticky, with average weekly earnings up 5.9 percent year-over-year (including bonuses), unchanged from the prior release and beating the expected 5.7 percent.
– Vacancies, a key metric for labor demand, continued to slide, falling to their lowest level since 2021.
– Payrolls in May came in at -3,000, surprising to the downside after expectations for a minor rise.
Taken collectively, these figures indicate a jobs market that’s gradually losing momentum: wages are still rising at a clip well above the BoE’s desired level, yet hiring activity and job openings are easing. The market reaction was measured; the Pound initially softened but quickly pared losses, capitalizing on a slight shift in risk appetite and the broader context of ongoing monetary policy debates.
### Implications for the Bank of England
The UK central bank finds itself in a challenging position, as sticky wage growth—traditionally a driver of services inflation—remains at odds with its 2 percent target. Yet signs of slackening employment suggest that underlying pressures could ease as the year progresses.
– Markets still price in a roughly 50-50 chance of a BoE rate cut at the August meeting.
– The September meeting sees even higher probabilities for a first move, reflecting mounting expectations that softer jobs data could finally unlock space for easing.
BoE policymakers have repeatedly stressed their data dependency and desire for clear evidence that domestic inflation, especially in services, is on a sustainable downward trajectory. Should upcoming CPI releases show cooling momentum and the labor market weakens further, the case for summer or early autumn easing becomes increasingly robust.
## The Pound: Modest Moves, Key Resistance Tested
Sterling’s reaction to the employment report was relatively subdued. After a brief dip, GBP/USD reversed course, trading somewhat higher in early sessions and approaching the critical 1.2800 resistance area.
– GBP/USD held firm near 1.2750, up slightly on the day.
– Technical traders eyed 1.2800 as a significant level, just shy of a multi-week high reached earlier in June.
– Against the euro, EUR/GBP steadied below 0.8450, continuing its recent consolidation after GBP registered gains in late May.
The general resilience of the Pound reflects the broader cross-currents in the currency market. With the BoE yet to clearly signal a pivot, sterling remains supported by one of the highest policy rates among advanced economies, at 5.25 percent.
## Global Focus: US Inflation Takes Center Stage
Market attention is now squarely focused on the US, where the May CPI report promises to be the week’s
Read more on GBP/USD trading.