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• Pound Sterling trades back and forth as investors shift focus towards the UK Employment data. 
• Soft wage growth data would soften the inflation outlook and increase expectations of the BoE cutting interest rates.
• Market volume to remain thin amid extended weekend in US markets.

The Pound Sterling (GBP) remains muted as investors await the United Kingdom labor market data for three months ending November, which will be published on Tuesday. Investors are anticipating a sharp decline in wage growth and see labor market conditions cooling further due to higher interest rates by the Bank of England (BoE) and a deepening cost-of-living crisis amid stubborn consumer inflation.

Soft wage growth data would improve progress in inflation returning towards 2% as lower earnings will eventually result in a decline in households’ spending power. Stubbornly higher wage growth has remained a major booster of sticky consumer price inflation and a decline in the same will provide more relief to BoE policymakers.

The GBP/USD pair is likely to remain inside the woods as the United States markets are closed on Monday. Trading volume is expected to remain thin due to an extended weekend. However, persistent bets in favor of rate cuts from the Federal Reserve (Fed) in the March monetary policy meeting would keep the US Dollar Index (DXY) on the back foot.
 

Daily Digest Market Movers: Pound Sterling remains sideways on closed US markets

• Pound Sterling struggles for a decisive move as investors await the United Kingdom labor market data for three months ending November, which will be published on Tuesday.
• Demand for labor is expected to remain vulnerable as job postings by the United Kingdom employers were 32% lower in December from a year ago. The Recruitment and Employment Confederation (REC) department said that permanent jobs declined all through 2023.
• Investors have projected a slight rise in the Unemployment Rate to 4.3% against the prior reading of 4.2%.
• The market participants will keenly focus on the Average Earnings data as robust wage growth has remained a key driver keeping consumer price inflation elevated in the United Kingdom economy.
• Average Earnings excluding bonuses is expected to decelerate sharply to 6.6% against 7.3% growth in the period of quarter-to-October while earnings data including bonuses is expected to soften to 6.8% from 7.2% in a similar period.
• A sharp decline in wage growth would wane fears of persistent inflation and escalate the odds of early rate cuts by the Bank of England.
• The Bank of America (BofA) predicts the BoE will consider cutting interest rates after its August monetary policy meeting. This contrasts with prior expectations of February 2025.
• On the contrary, BoE policymakers have not publicly discussed rate cuts at all as the consumer price inflation in the UK economy is highest in comparison with other Group of Seven economies.
• BoE policymakers have been reiterating the need to keep interest rates on an elevated trajectory to ensure that inflation will return to 2% in a sustainable manner.
• After being vulnerable in 2023, the British real estate sector has made a decent start to 2024. The UK’s leading real estate platform Rightmove reported a 1.3% increase in asking prices in the period of December 3 to January 6, the highest since 2020. 
• The market mood is quiet amid an extended weekend in the United States market due to it being Martin Luther King Day.
• The US Dollar Index (DXY) trades back-and-forth around 102.40 as investors shift focus towards the monthly Retail Sales data and the release of the Federal Reserve’s (Fed) Beige Book on Wednesday.
• Meanwhile, investors’ confidence towards a rate cut decision from the Fed in March has improved after the release of the softer-than-projected Producer Price Index (PPI) report for December.
• As per the CME FedWatch tool, chances supporting a rate cut in March have improved to 70% after declining to 62% last week.
   

Technical Analysis: Pound Sterling consolidates above 1.2700

Pound Sterling trades listless above the crucial support of 1.2700 as investors await the crucial UK data for further action. The GBP/USD pair has oscillated in a range between 1.2674-1.2784 for the past week. The broader appeal is still bullish as the 20 and 50-day Exponential Moving Averages (EMAs) are sloping higher. The 14-period Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, indicating a consolidation ahead. Fresh upside in Cable is expected if it manages to climb above a five-month high around 1.2820.

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