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Wage Growth Remains Elevated, Potentially Limiting the BOE to a Single Additional Rate Cut This Year
Forex
Economic
Summary:
The limited deceleration in wage growth constrains the Bank of England's capacity to lower interest rates. The unexpectedly robust labor market provides short-term support for the British pound.
Buy
CLOSEDGBPUSD
End Time
1.34766
Entry Price
1.37250
TP
1.33000
SL
1.34899 -0.00216 -0.16%
967
Points
Profit
1.33000
SL
1.35733
CLOSING
1.34766
Entry Price
1.37250
TP
Fundamentals
According to data released Tuesday by the U.K.'s Office for National Statistics, the July labor market performed slightly better than anticipated, with a noticeable slowdown in the decline of employment. The number of employees on payrolls decreased by 8,000, the smallest drop since January, and significantly better than the market's forecast of -20,000. This eased market concerns stemming from the increase in corporate taxes.
Previously, since the rise in corporation tax and a substantial increase in the minimum wage last October, the cumulative reduction in employees on payrolls has reached 165,000.
In the three months leading up to June, average regular pay saw a robust 5.0% year-over-year increase, maintaining a strong growth trajectory. Despite the Bank of England's recent decision to lower the key interest rate to 4.00% last week, the rise in wages remains a source of uncertainty for monetary policy. It is anticipated that the year's final rate cut may occur this year, amid signs of gradual easing.
The modest improvement in employment data is expected to support the short-term performance of the British pound. With no clear indication that the Bank of England will accelerate its pace of interest rate cuts, the GBPUSD is likely to continue its upward trend in the coming days.
Technical Analysis
During the European session on Tuesday, the U.S. dollar experienced a modest rebound, exerting downward pressure on the British pound. Consequently, the GBPUSD retreated from its earlier two-week high, consolidating below 1.3476 and maintaining a neutral stance for the day. The outlook for the GBPUSD remains bullish as long as the 1.3344 support level holds.
From a broader perspective, the upward trend initiated from the 1.3051 low in 2022 persists. The subsequent medium-term target is the 61.8% Fibonacci projection from 1.2099 to 1.3433, with a final objective at 1.4004. The bullish sentiment is expected to persist, even amid significant pullbacks, provided the 55-day SMA, currently at 1.3068, remains intact.
Trading Recommendations
Trading Direction: Buy
Entry Price: 1.3341
Target Price: 1.3725
Stop Loss: 1.3300
Valid Until: August 27, 2025 23:55:00
Support: 1.3413, 1.3366, 1.3318
Resistance: 1.3469, 1.3507, 1.3590
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