The GBP/USD pair is trading lower around 1.3040 during the Asian trading hours on Tuesday, following a two-day rally. The recent pullback comes after the release of mixed employment data from the United Kingdom (UK), which has left traders cautious.
In the three months leading up to August, the UK ILO Unemployment Rate decreased to 4.0%, down from July’s 4.1% and below market expectations of 4.1%. Employment Change for August showed a significant increase of 373,000, up from 265,000 in July, indicating a strengthening labor market. However, Average Earnings excluding Bonuses rose by 4.9% year-on-year in the three months to August, aligning with expectations but slightly lower than July’s growth of 5.1%. This mixed employment picture has contributed to the subdued sentiment around the GBP.
On the other hand, the US Dollar (USD) continues to gain momentum, bolstered by rising expectations that the Federal Reserve (Fed) will maintain a less aggressive approach to interest rate cuts. The recent robust jobs report and concerns over persistent US inflation have solidified this outlook. According to the CME FedWatch Tool, there is an 88.2% probability of a 25-basis-point rate cut in November, with no anticipation of a larger reduction.
Federal Reserve Bank of Minneapolis President Neel Kashkari reaffirmed the Fed’s data-dependent approach on Monday, emphasizing the strength of the US economy and noting the ongoing easing of inflationary pressures, despite a slight uptick in the overall unemployment rate. This positive sentiment around the USD has further pressured the GBP/USD pair as market participants reassess their positions ahead of upcoming economic indicators.
As traders await further data releases and potential shifts in market sentiment, the GBP/USD pair may continue to navigate through volatility in the coming sessions.
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