The British pound is showing little movement on Monday. In the North American session, GBP/USD is trading at 1.2592, up 0.06% on the day.
UK job growth expected to plunge
The markets are bracing for a sharp decline in employment in the three months to December, with a forecast of -130 thousand. This follows an increase of 36 thousand in the three months to November. Job growth has posted eight consecutive three-month periods of growth and the resilient labor market has eased pressure on the Bank of England to lower interest rates.
The unemployment rate is projected to creep up to 4.5% from 4.4%, and wage growth (including bonuses) is expected to rise to 5.9% in the three months to December, up from the previous release of 5.6%. Wage growth has been moving higher and is fueling inflation.
The Bank of England doesn’t meet till March 20 and after cutting rates earlier this month, back-to-back rate cuts remain unlikely. On Monday, Governor Andrew Bailey poured some cold water over last week’s better-than-expected GDP release, saying that the UK economy remained “quite static”. GDP for the fourth quarter eked out a gain of 0.1%, better than the BoE forecast of a contraction. The BoE remains concerned about sticky inflation and growing global political uncertainty.
The US ended the week with a disappointing retail sales report. January retail sales slid 0.9%, much worse than the market estimate of -0.1% and following a solid gain of 0.7% in December. This was the sharpest decline since March 2023, as severe weather and the Los Angeles fires dampened consumer spending. Annually, retail sales eased to 4.2%, down from an upwardly revised 4.4% in December and above the forecast of 3.7%.
GBP/USD Technical
- GBP/USD tested support at 1.2585 earlier. Below, there is support at 1.2539
- 1.2630 and 1.2676 are the next resistance lines
