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GBP/USD slumps as weak jobs data fuels BoE rate cut expectations

GBP/USD is falling 2131 after weaker-than-expected labour market data boosted expectations that the Bank of England will cut interest rates next month.

The unemployment rate climbed to a four-year high of 5% up from 4.8% in the previous reading and exceeding expectations of 4.9%. Meanwhile, the employment level fell for the first time since 2024. The number of employees on payroll fell 32,000 following a downwardly revised 32,000 in September.

Regular pay growth slowed to 4.6% the weakest level since February to April 2022. Well, total pay, including bonuses, rose to 4.8% slightly below the 4.9% forecast

. The data highlights a weakness in the UK jobs market following the Chancellor’s Budget, which increased the tax burden on employers. From April, employer National Insurance contributions rose, as did the minimum wage, making it more expensive for businesses to employ staff.

Following the data, the market lifted BoE December rate cut expectations to 80% from 68% on Monday.

The report provides further evidence that the UK jobs market is weakening. Bank of England governor Andrew Bailey voted to keep rates unchanged this month but signalled he could be persuaded to cut next month if incoming data confirmed that inflationary pressures were easing and that the labour market was continuing to weaken.

Attention will now turn to GDP figures out on Thursday, which are expected to show growth of 0.2% down from 0.3% in Q2.

These data points come ahead of the November 26 budget, in which Reeves is expected to raise taxes on households to fill a funding gap. Increase tax code, slow growth, and inflation.
 

GBP/USD forecast – technical analysis

GBP/USD’s recovery from 1.30 ran into resistance at 1.32 before rebounding sharply lower to 1.3125 at the time of writing. Sellers will look to extend the selloff towards 1.31 and below here 1.30. A break below 1.30 opens the door to a much deeper selloff towards 1.27, the April low.

Any recovery would need to rise above 1.32 to expose the 200 SMA at 1.3270

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DAX rises for a second day following a US government shutdown deal

The darks, along with their European peers, are rising on Tuesday as investors weighed up the potential end to the most extended U.S. government shutdown in history and looked ahead to the ZEW economic sentiment data.

Global stocks had a strong start to the week, with European shares posting their largest daily gain in six months on Monday amid a relief rally following signs the US government shutdown was ending late last night. The US Senate passed a deal to restore U.S. Federal funding to reopen the government after its longest-ever shutdown. This will now be voted on in the House

The end of the shutdown restores economic stability and could also mean the resumption of crucial official data releases.

German data from ZEW economic sentiment will be released today and is expected to rise to 40, up from 39.3 in October. Economic sentiment was weighed down in October by sluggish economic performance.  However, recent German PMI figures showed that business activity was at a 2-year high, which could help boost economic sentiment. Upbeat data could help support the DAX.

Looking ahead, the US ADP 4-week payroll average will be released and could provide some insight into the health of the labour market amid the data drought.
 

DAX forecast – technical analysis

The DAX ran into resistance at its record high of 24,770 and eased lower. The price continues to trade above the rising trendline and consolidates on the 50 SMA.

Buyers will look to extend above 24,400, the late October high, to bring 24,770 and fresh record highs into focus.

Sellers will need to break below the 50 SMA at 24000 to test the rising trendline support at 23,650. Below here the 200 SMA at 23,400 and the horizontal support come into focus.
 

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