Forex Fundamental Analysis – GBP/USD ahead of UK employment data


Events to pay attention to today:

09:00 GMT+3. GBP – Claimant Count Change


The GBP/USD pair is trading with small losses near 1.2730 in the early Asian session on Tuesday. Traders may prefer to adopt a wait-and-see stance ahead of the UK employment report due later in the day. Meanwhile, lower bets for a rate cut by the US Federal Reserve (Fed) this year are likely to bolster the US Dollar and limit the pair’s gains.

UK employment growth has been contracting over the past few months and is likely to continue in May, making it easier for the Bank of England (BoE) to reduce borrowing costs. However, average earnings, a measure of wage growth, remains strong and this could persuade the central bank to delay this year’s easing cycle. Any signs of stronger employment market data could support the Pound Sterling (GBP) in the near term.

Last week’s US jobs data fuelled speculation that the Fed would raise rates for longer. This stronger data provided some support for the US Dollar in previous sessions. According to the CME FedWatch tool, the probability of a rate cut at the September meeting is almost 47%, compared to 68% before the NFP data was released.

The US consumer price index (CPI) data released on Wednesday will be crucial for the Federal Reserve, as the central bank has emphasised in recent weeks that it will wait for new inflation data before cutting the interest rate. The US core CPI is expected to rise 3.4% year-on-year in May, while the core CPI for the same period is expected to rise 3.5% year-on-year. Following the CPI data release, the Fed will announce its interest rate decision and update the Summary of Economic Projections (SEP). The Fed’s hawkish tone could lift the US dollar and create a headwind for GBP/USD.

Trading recommendation: Trading mainly by Buy orders from the current price level.

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