- UK jobless claims fell sharply from 102,300 to 23,700.
- After the non-farm payrolls report, the likelihood of a 50 basis point Fed rate cut in September fell.
- Economists are forecasting soft US inflation numbers on Wednesday.
GBP/USD price analysis shows a brief recovery due to positive UK employment data. Still, the downtrend remains intact as the dollar strengthens ahead of Wednesday’s US consumer price index report.
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Data on Tuesday revealed that the UK labor market remained largely resilient despite high interest rates. Despite some softness, employment remains high. It is significant that claims for the unemployed fell sharply from 102,300 to 23,700. However, wage growth slowed to its lowest level in more than two years, supported by further rate cuts by the Bank of England.
Experts believe that the BoE will continue to cut rates, but will do so gradually. Similarly, Friday’s jobs report boosted the dollar as it showed both weakness and strength. The US labor market has been in decline in recent months. Job growth has slowed significantly and the unemployment rate has jumped, reinforcing expectations for a rate cut.
However, whether it will be a massive cut or a small cut is still debated. After the non-farm payrolls report, the likelihood of a 50 basis point rate cut fell as the unemployment rate eased. However, there is another big report that could change this perspective.
Economists expect mild inflation on Wednesday. The annual number could be 2.6%, which is closer to the 2% target. A bigger-than-expected easing could raise bets for a big rate cut. Otherwise, the Fed will likely settle for a small rate cut.
GBP/USD key events today
Investors will continue to digest UK employment data as no more key reports are released today.
GBP/USD Price Technical Analysis: Bullish pullback could be stopped at 30-SMA
On the technical side, GBP/USD is rising to retest the 30-SMA. However, the bearish bias remains as it is trading below the 30-SMA with the RSI below 50. In particular, the bears showed tremendous strength when the price revisited the key level of 1.3200. It bounced lower with a strong bear candle, pushing below the 30-SMA.
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The current move could reach the 30-SMA before the bears emerge. If they come back, the price will fall to face a solid support zone consisting of the key psychological levels of 0.5 Fib and 1.3000. A break below this zone will strengthen the bearish bias.
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