GBP/USD hides in congestion ahead of key labor and inflation data

GBP/USD is holding steady after losing the 1.3600 handle.
Key UK labor data and US inflation figures from Q2 are on the offer in the days ahead.
GBP/USD still leans firmly bullish, but a near-term ceiling may be priced in.

Joshua Gibson FXStreet

GBP/USD Held steady within recent consolidation on Monday, testing the waters near 1.3550. Cable traders are bracing for a fast one-two punch of UK and US data over Tuesday and Wednesday, and trade-related headlines continue to loom over market sentiment, further crimping momentum as investors hope for a cooldown in the US’s latest broad tariff tensions with China.

Trade talks are underway in London this week between the Trump administration and China’s government. Investors are hoping that the US and China will meet in the middle enough to convince the Trump administration to stop holding its own constituents as economic hostages with steep import taxes and tech trade restrictions.

Tuesday will kick things off on the midweek data docket with an update to UK labor and earnings figures. Base average earnings growth is expected to cool to 5.4% through the quarter ended in April, while a jump in the Claimant Count Change is also expected. The number of new unemployment benefits seekers is expected to rise to 9.5K in May.

On the US side, Consumer Price Index (CPI) inflation is slated for Wednesday. Headline US inflation figures are expected to rise as post-tariff inflation data leaks in through the second quarter dataset, which could spell trouble for investors hoping for rate cuts from the Federal Reserve (Fed) this year. Headline CPI inflation is expected to tick up to 2.5% YoY in May.

GBP/USD price forecast

GBP/USD has been knocked back from multi-year highs, but Cable bids remain close to the surface. The pair is holding steady in near-term congestion north of 1.3500, and the pair is still leaning firmly bullish with prices well above the 200-day Exponential Moving Average (EMA) near 1.2960.

GBP/USD daily chart

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

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