• Recently, the British pound fell against the euro, dollar, and other major currencies after investors bet that official wage figures were below par, suggesting that the Bank of England could follow up with more significant interest rate cuts soon.
• As a result, the GBP/USD pair gave up its recent gains, which had reached the resistance level of 1.2785 at the end of last week's trading, with losses extending to the support level of 1.2619. technically, that’s before stabilizing around the level of 1.2630 at the start of today's session. 

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The odds of a rate cut in May rose after annual growth in average total earnings (including bonuses) reached 6.5% in the period from September to November 2023. Therefore, this represents less than the consensus forecast of 6.8% and well below the Bank of England's expectations. On the other side, normal earnings (excluding bonuses) were reported at 6.6% by the Office for National Statistics, which was in line with expectations. 

Reflecting a slight recalibration in expectations for rate cuts from the Bank of England after the release of the data was the weakness of the pound sterling. According to forex market trading, the pound fell against the euro to 1.16 in the minutes following the release, reaching a daily move of -0.12%. Currently, the pound against the dollar was already under pressure before the release of UK data, but it continued to fall to -0.70% for today at 1.2620. 

In general, the market is betting that the British labor market is gradually cooling, meaning that there are enough job seekers to fill the vacancies and cool wages. Moreover, this was confirmed after the Office for National Statistics reported that the number of employees receiving wages fell temporarily by 24,000 on a monthly basis in December, which was below the consensus forecast of -13,000. For its part, the Bank of England sees wage increases as a risk that could ensure that inflation remains above 2.0% for an extended period and has maintained its desire to keep interest rates at current levels until it is confident that domestic inflation will fall sustainably. 

Meanwhile, signs of a cooling British labor market can be found in a decline of 49,000 in the estimated number of job vacancies in the fourth quarter to 934,000, although it remains higher than pre-pandemic levels. Ultimately, the Office for National Statistics says its new experimental estimates reveal that the unemployment rate in the UK is 4.2%, which confirms that the labor market will not give up in any case. Commenting on this, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the Bank of England's Monetary Policy Committee (MPC) will move cautiously as wages are likely to stabilize. He adds: “The MPC can be more confident that wage growth has slowed after today's release, but it is likely to remain so concerned about near-term expectations that it does not indicate at its meeting next month that it will cut the bank rate several times this year.” 
 

GBPUSD Expectations and Analysis Today: 

In recent trading sessions, bulls failed to achieve further gains for the GBP/USD currency pair. Technically, It was natural for profit-taking selling operations to occur, and what helped these operations was the strength of the US dollar against the rest of the currencies in light of investors' aversion to risk. According to the performance on the daily chart above, breaking the GBP/USD support level at 1.2600 will increase the momentum for the bears to move further down. Furthermore, the RSI indicator is still at the halfway point with a downward slope and will not move towards oversold levels without moving towards the next most important support 1.2490. Finally, the pound sterling dollar will be affected today by the announcement of British inflation numbers, then the most important US retail sales numbers. 

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