GBP/USD falls as UK unemployment rises & wage growth slows
GBP/USD fell after data showed UK employers cut jobs in April by the most since the start of the pandemic, adding to signs that the labour market is weakening as higher energy costs and geopolitical uncertainty weigh on business confidence.
Payroll employment fell by 100,000 in April, following a revised 28,000 decline in March and far exceeding expectations for a modest 10,000 drop. The unemployment rate for the three months to March rose to 5% from 4.9%, while the single-month measure climbed to 5.5%, the highest since 2015. Vacancies also fell to their lowest level since 2021.
Wage growth also slowed to 3.4% from 3.6%, which comes at a time when prices are rising, putting more pressure on household incomes.
The figures reinforce evidence of a sharp cooling in labour demand and prompted traders to scale back expectations for further Bank of England tightening, with markets now pricing around 57 basis points of rate hikes by year-end.
The weak data is also likely to intensify pressure on Prime Minister Keir Starmer, whose government has faced criticism over last year’s payroll tax and minimum wage increases, measures many businesses blame for rising labour costs. Political uncertainty has also increased amid growing unrest within the Labour Party, with Andy Burnham emerging as a leading potential successor should Starmer face a leadership challenge.
Attention now turns to UK inflation data on Wednesday. CPI is expected to rise 0.9% month-on-month in April up from 0.7% in March, while the annual rate is forecast to slow to 3% from 3.3%. Softer inflation alongside a deteriorating labour market could reinforce expectations for a more cautious policy outlook and add further pressure on sterling.
GBP/USD – Technical analysis
GBP/USD reversed lower after running into resistance at 1.3650, forming a double-top bearish reversal pattern. The price then broke below the trendline support and the 50 and 200-day moving averages to support at 1.33. A rebound from 1.3300 stalled at the 200-day moving average near 1.3430, reinforcing the bearish bias.
Momentum indicators remain negative, with the RSI below 50. Sellers will look for a break below 1.3300 to expose 1.3200.
On the upside, buyers would need to reclaim the 200-day moving average at 1.3435 to target 1.3535 and potentially 1.3600.
USD/JPY rises despite stronger Japanese GDP data
USD/JPY rose above 159 on Tuesday as the dollar held steady, with investors looking past stronger-than-expected Japanese growth data and focusing instead on the broader inflation and geopolitical backdrop.
Japan’s economy expanded at an annualised 2.1% pace in the first quarter, beating forecasts for 1.7% growth and accelerating from 1.3% previously. The upside surprise was driven by stronger exports and resilient consumer spending, including a 29.3% surge in semiconductor equipment shipments.
Still, investors largely discounted the backward-looking data, focusing instead on the economic risks stemming from the U.S.-Iran conflict and elevated energy prices. The Bank of Japan lowered its 2026 growth forecast to 0.5% from 1% while raising its core inflation outlook to 2.8%, highlighting concerns around a stagflationary backdrop.
Attention now turns to Friday’s CPI report after core inflation accelerated in March for the first time in five months. The recent rebound in the yen has also reversed much of the impact from Japan’s earlier currency intervention efforts near the 160 level.
The dollar steadied after softening in the previous session amid optimism over potential diplomatic progress between Washington and Tehran. President Trump reportedly suspended planned strikes on Iran to allow negotiations to continue. Even so, expectations that higher energy prices could keep US inflation elevated have supported speculation the Federal Reserve may still tighten policy further this year. FOMC minutes will be released on Wednesday.
USD/JPY – Technical analysis
USD/JPY remains above its multi-month rising trendline, preserving the broader bullish structure. The rebound from the 155 area has pushed the pair back above the 50-day moving average, while the RSI remains above 50, supporting further upside potential.
Buyers will look for a move towards 160, while immediate support sits at 157.90. A break below that level would expose trendline support around 156.35, followed by 155.00. A sustained move below 155 would mark a lower low and weaken the broader bullish outlook.
Comments
Log in or sign up to join the conversation.