UK Jobs, US CPI in Focus

The UK labour market is expected to remain tight, keeping the BOE in check, while investors wait to see if tariffs are having an impact on US inflation and the outlook for the Fed.

UK Jobs Market An Obstacle to Easing

The UK unemployment rate is expected to remain unchanged at 4.4% when the Office for National Statistics (ONS) releases its data on Tuesday. The tightness of the labour market could keep the BOE from easing due to potential inflationary pressures from strong employment figures. Although the central bank recently cut rates as expected, a three-way split in the decision . Another sign of a potential hold is the average earnings, which are expected to decline to 5.3% from 5.6%, though this is still above inflation and may signal that labour market tightness contributes to higher consumer prices.

However, there are also signs that the . The employment change for April is expected to see a drop to -20K. This massively contrasts with the prior outlier of +206K, as recent tax hikes and uncertainties surrounding global trade have dampened employer sentiment. However, even a survey indicated plans to reduce hiring this year, which aligns with the bank’s projections of a weaker labour market in the short term. While this could reinforce expectations for further easing, the BOE might take a more cautious approach until the data confirms the trend, potentially providing support for the pound.

US Inflation Staying Stubborn

Meanwhile, the Fed is expected to see its current policy stance hold on track, as US inflation pressures persist due to the impact of tariffs, primarily against China, and may start filtering through the economy. The Fed recently warned last week that , in addition to potential economic slowdown concerns. If the effects of inflation are not as large as feared, the Fed could consider easing to support the economy. Nonetheless, as long as it remains above the Fed’s target, markets may continue to speculate on the timing of the next rate cut and support the US dollar.

Headline April US inflation is projected to rise to 2.5% from 2.4% previously, despite lower gasoline prices, as other consumer goods are expected to increase in price. Last month, economists forecasted higher inflation due to tariffs, but this estimate contracted with a wide range of consumer goods, which saw declines as the . Traders will likely scrutinise the components of the inflation figure to assess the impact of tariffs. If inflation surprises to the downside, a weaker US dollar could support the GBP/USD pair, particularly if the British jobs market remains tight.

GBPUSD H&S Threatens Lower Levels

A head and shoulders pattern on cable has opened the door for a potential measured-move decline towards 1.3050 if the 1.31 handle breaks, exposing 1.30. Conversely, if bulls hold the 1.32 line and manage to reclaim 1.3210 and the neckline bottom of 1.3260, prices might recover towards 1.33 and 1.34, paving the way for new highs above 1.3450.

Source: SpreadEX / EURUSD

Key Takeaways

UK labour market tightness could influence the BOE's easing path, with strong numbers potentially preventing the bank from cutting. Across the Atlantic, US inflation data will guide the Fed's rate outlook, with the impact of tariffs closely watched for clues on potential inflationary pressures. Both of these events will likely determine the trajectory of the GBPUSD.