- The UK unemployment rate fell from 4.4% in May to 4.2% in June.
- After the UK jobs report, investors cut the likelihood of a September BoE cut from 38% to 35%.
- Traders remained cautious as they awaited US wholesale inflation data.
The GBP/USD outlook shows increased bullish enthusiasm, with the pound gaining ground after better-than-expected UK jobs numbers. At the same time, investors remained wary of US wholesale and consumer inflation figures that will shape the outlook for a Fed rate cut.
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Data on Tuesday revealed that the unemployment rate in the UK unexpectedly fell. It is significant that the unemployment rate fell from 4.4% in May to 4.2% in June. A resilient labor market is likely to keep expectations of a BoE rate cut low. Accordingly, following the report, investors cut the likelihood of a September BoE cut from 38% to 35%. Recently, the central bank started its cycle of interest rate cuts. However, some policymakers believe that services inflation remains relatively high.
However, wage growth in the UK fell to its lowest point in almost two years, suggesting that inflationary pressures are easing. Slower wage growth means weaker consumer spending, allowing downward pressure on prices to continue.
Meanwhile, traders remained cautious as they awaited US data on wholesale inflation. The PPI report is a key indicator of future consumer prices. Therefore, cooling prices will solidify bets for a September Fed rate cut.
At the same time, a report on consumer inflation is expected on Wednesday. Economists expect inflation to be 3.0% in July. If it meets expectations or falls, there will be more confidence in the September cut. On the other hand, a surprise jump could reduce bets for a 50 bps cut.
GBP/USD key events today
- USA core PPI m/m
- US PPI m/m
GBP/USD Technical Outlook: The price is on the threshold of a new top
On the technical side, the GBP/USD price is on the verge of making a higher high. The price has recently reversed its downtrend following the bullish divergence of the RSI. It is currently above the 30-SMA, with the RSI heading towards the overbought region.
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However, the bulls face a solid barrier consisting of the 1.2800 resistance and the 0.382 Fib retracement level. A break above this level would allow the price to make a higher high and confirm a new uptrend. Moreover, it will allow GBP/USD to climb to the next barrier at 1.2900.
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