Since the beginning of May, the GBPUSD pair has been trading flat with a lower boundary of 1.25 and an upper boundary of 1.26. At the moment, the price has moved significantly away from the April low of 1.23, but the bulls do not have enough strength to make further significant gains. After the upward movement of the past few days, there have been signs of a correction this morning. As a result, the price may quickly return to the 1.25 level.
Today's statistics on the UK labor market triggered the downward pullback in GBPUSD. The unemployment rate rose to 4.3%, the highest since last summer. At the same time, the overall data for the 1st quarter reflects the reduction in the number of employed in the national economy by almost 180 thousand people. Such a decrease has not been seen since the introduction of COVID-19 pandemic-related restrictions in the spring of 2020.
Other indicators of the report, presented by the Office for National Statistics (ONS) of the United Kingdom, are not optimistic either. The number of job openings fell below 900,000 for the first time in three years, and the ratio of unemployed people to each job opening reached its highest level since August 2021. The Bank of England forecasts that the labor market will continue to cool for 2 years, leading to a slowdown in wage growth and inflation.
Yael Selfin, chief economist at KPMG UK, notes the importance of the next ONS report, which will be released just before the Bank of England meets on June 20. It should reflect the impact of a 10% increase in the national minimum wage. If this move does not lead to a sharp rise in average wages in the economy, the British regulator will have no reason to hesitate to cut the key interest rate. In the absence of a similar move from the Fed, GBPUSD exchange rate may face serious pressure.
Tomorrow's inflation statistics from the United States may accelerate the pound's decline against the dollar. If the price growth rate comes in worse than expected, the GBPUSD correction will not be long in coming.
Consider the following trading strategy:
Selling GBPUSD at the current price. Take profit – 1.25. Stop loss – 1.26.
Traders may also use a Trailing stop instead of a fixed Stop loss at their discretion
This content is for informational purposes only and is not intended to be investing advice.
