During Tuesday's London session, the Pound Sterling (GBP) exhibited resilience, rebounding from intraday losses to reach 1.2740 against the US Dollar (USD). This recovery, despite disappointing UK employment figures for the three months ending April and a sturdy USD, underscores the complex dynamics shaping the currency markets.
The UK Office for National Statistics (ONS) reported a prolonged downturn in the labor market, with employment declining by 140,000 workers for the fourth consecutive period. Although this represents a slight improvement from the previous quarter, the ILO Unemployment Rate climbed to 4.4%, surpassing expectations and marking its highest level in over two years. These figures underscore the challenges faced by businesses amid the Bank of England's (BoE) tightening monetary policy stance.
Nevertheless, the negative impact on the BoE's policy framework was partly offset by steady wage growth during February-April. Key wage inflation metrics, such as Average Earnings Excluding Bonuses and Average Earnings Including Bonuses, either met or surpassed estimates, suggesting resilience in the labor market despite broader economic headwinds.
Market sentiment remained cautious ahead of the US Consumer Price Index (CPI) data for May and the impending Fed interest rate decision. Analysts anticipate subdued inflation growth, with expectations of a slower monthly headline inflation rate compared to April. However, core CPI figures are expected to remain steady, indicating a nuanced inflationary environment.
In the realm of technical analysis, the GBP/USD pair presents several noteworthy trends. A death cross formation between the Exponential Moving Averages (EMA) 50 and 200 on the 1-hour chart signals a bearish sentiment. Additionally, the Ichimoku cloud indicator reflects a bearish outlook, with key resistance levels identified at the Ichimoku cloud and the EMA 200. Conversely, crucial support is observed at yesterday's swing low of 1.2688, bolstered by a hammer candlestick followed by a bullish engulfing pattern, suggesting a potential reversal.
However, oscillator readings add weight to the bearish sentiment, with the Relative Strength Index (RSI) failing to surpass the 60% threshold and the Moving Average Convergence Divergence (MACD) exhibiting weakness near the zero line. These technical indicators collectively advocate for a cautious approach among GBP/USD traders, emphasizing the importance of monitoring key support and resistance levels to navigate potential market shifts accurately.
As market participants await the Fed's interest rate decision, investor focus remains on deciphering future monetary policy trajectories. Speculation suggests minimal expectations for rate cuts in the near term, with a single cut likely later in the year. Clear signals from the Fed will be pivotal in guiding market sentiment and shaping trading strategies moving forward.
Actual 50.4Kvs Forecast 10.2K vs Previous8.4K
Actual 4.4% vs Forecast 4.3% vs Previous4.3%
Actual Forecast 4.9% vs Previous-11.7%
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