GBP Struggles Amid Labor Market Data, ECB and USD Dynamics.

  • GBP weakens as UK labor market cools, with a notable rise in unemployment and job losses reported by ONS.
  • BoE may consider earlier interest rate cuts to address economic uncertainty and sustainably manage inflation.
  • ECB foresees a stronger Euro in late 2024 with potential rate cuts, influenced by political and fiscal factors.
  • USD gains strength, pushing GBP/USD lower, as technical analysis points to continued bearish sentiment.
  • Fed’s cautious stance on inflation underscores the importance of confidence in targeting before policy adjustments amidst solid economic growth and labor market strength.

GBP: The Pound Sterling (GBP) faced weakness in London’s Tuesday session following the United Kingdom’s Office for National Statistics (ONS) report on cooling labor market conditions. With a significant rise in the Unemployment Rate to 4.2% and 156,000 job losses in the three months ending February, concerns over the economic outlook loom. This data might prompt Bank of England (BoE) policymakers to consider interest rate cuts sooner than expected. Slower wage growth amid job uncertainty could sustain high inflation levels, adding to the Pound’s volatility. Anticipation builds as the UK ONS prepares to release consumer and producer inflation data for March, potentially impacting BoE’s future decisions.

ECB: Rabobank foresees limited immediate progress but expects a strengthening Euro to 1.1900 by the second half of 2024 as the ECB looks to cut rates. Despite the Labour Party’s strong lead in opinion polls, potential fiscal policy constraints under a new Labour government might affect Pound’s growth. Nonetheless, policy continuity could offer stability. While Middle East tensions may dampen GBP/USD, GBP/EUR resilience is anticipated. Market perception favors ECB rate cuts in contrast to the BoE, influencing currency dynamics.

USD: With the US dollar gaining strength and the Pound weakening, GBP/USD’s downward trajectory persists. Recent breaches of key support levels and moving averages signal bearish sentiment. Technical analysis identifies upcoming support levels, guiding traders amid a robust US dollar backdrop. Federal Reserve Bank of San Francisco President Mary Daly’s remarks highlight the cautious approach towards inflation, emphasizing the need for confidence in targeting before policy adjustments, considering the economy’s solid growth and strong labor market.

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.