• The GBP/USD outlook turns bullish despite a mixed UK labor market data.
• Gradual cooling in the labor market suggests that the central bank could refrain from further easing.
• Markets now await UK CPI and retail sales data for further cues on the UK economy.

GBP/USD is holding a strong bullish bias despite the latest UK labor market data, which showed a downtick. The report does not provide the Bank of England with a clear reason to become more hawkish. Headline ILO unemployment stayed at 5.1% in the three months to November, above the expected 5.0% and the highest since early 2021.

At the same time, jobless claims rose by 17.9K in December, pointing to some softening at the margin. Taken together, these figures suggest the labor market is loosening slowly rather than cracking, which keeps growth concerns alive without delivering the kind of weakness that would force an immediate policy pivot.

On wages, the picture is similarly mixed and broadly in line with expectations. Regular pay (excluding bonuses) grew 4.5% 3M YoY, matching consensus and only a tick below the prior 4.6%, while total pay including bonuses rose 4.7%, slightly above the 4.6% forecast.

Wage growth is clearly off its peak but still running at levels that are uncomfortable for a central bank targeting 2 % inflation. This reinforces the idea that the BoE can stay cautious on cuts, but it is not strong enough to resurrect meaningful hike pricing. For sterling, that means the data are mildly supportive relative to recession fears, but not a game-changer.

On the USD side, the backdrop remains dominated by politics and tariffs rather than pure macro. The dollar is under pressure as markets digest Trump’s threat of new tariffs on European allies, including the UK, tied to the Greenland dispute.

This has revived talk of EU retaliation and even a gradual rethink of “buy America” and US asset allocations, which weighs on the greenback at the margin. However, expectations that Fed cuts are only likely from June and will be on a very gradual path are helping to cap USD downside.

The GBP/USD finds support from a labor market that is easing only slowly and wage growth that remains firm, alongside a politically constrained USD. But with UK growth still fragile and tariff risks hanging over both economies, the pair is more likely to grind than trend aggressively until CPI and retail sales either confirm or challenge this “slow?cooling” UK story.
 

GBP/USD Technical Outlook: Bulls Takeover, Aiming for 1.3500
 

(Click on image to enlarge)

GBP/USD 4-hour chart
 

The GBP/USD 4-hour chart shows the price rejecting bearish pressure and moving back above the key MAs. The next key level in sight is 1.3500 for the buyers. The RSI near 60.0 suggests a bullish momentum.

The 50-period MA at 1.3425 remains a pivot point. Slipping below the level could find more sellers and test 1.3400 ahead of weekly lows around 1.3340. However, the path of least resistance lies on the upside.

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