empty
14.08.2024 12:18 AM
Key labor market and inflation data will reduce uncertainty regarding the pound. Overview of GBP/USD

The Bank of England started its easing cycle on August 1, and the market expects a further 50 basis points cut by the end of the year. The Bank of England's chief economist, Huw Pill, voted against the cut and warned against expecting more rate cuts in the near future. The market considered this and currently assigns less than a 50% probability to a rate cut next month.

Today's agenda includes updated data on the labor market and inflation. Labor market data for July was released this morning, and it turned out to be significantly unexpected. Average wage growth, excluding bonuses, slowed from 5.7% to 5.4%, which seems like good news in terms of slowing inflation. However, forecasts had suggested a fall to 4.6%. Now, the likelihood of a BoE rate cut next month has become even less likely, which is a frankly bullish signal for the pound.

This image is no longer relevant

At the same time, unemployment rose from 4.4% to 4.7%, and the number of jobless claims was 135,000, compared to a forecast of 14.5%. The sharp increase in claims indicates that the economy is closer to a recession than previously thought, and this figure, on the contrary, provides grounds to continue lowering rates.

As we can see, the market received two opposing signals on Tuesday and reacted with only a slight spike in volatility. It seems that significant conclusions will be drawn on Wednesday after the release of the consumer inflation report.

The NIESR Institute, analyzing various statistical data (CPI, PPI, 10-year UK government bond yields, effective GBP exchange rate, BoE bank rate) within its own forecasting model, expects July inflation to be between 2.2% and 2.4%. This is higher than the previous month and aligns with market forecasts. Interestingly, the forecasts suggest that inflation will decrease to 2% in September, which supports further rate cuts, but then, due to accumulated effects, it will rise back to 2.9% by early 2025, which suggests caution regarding rate cuts.

As we can see, the uncertainty is too high to make a definitive forecast. The market balances expectations for the Federal Reserve and BoE rates, which provides a driver for movement in either direction. However, the accumulated uncertainty needs resolution.

This image is no longer relevant

The net long GBP position decreased by $3.0 billion to $5.9 billion over the reporting week. Despite the significant decline, the bullish bias persists, and although the calculated price has lost some momentum, it is still above the long-term average.

Kuvat Raharjo,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

XAU/USD. Analysis and Forecast

Gold continues to show resilience, climbing above the key psychological level of $3300. Geopolitical tensions stemming from the prolonged Russia–Ukraine conflict and escalating hostilities in the Middle East continue

Irina Yanina 17:45 2025-05-05 UTC+2

USD/CHF: Analysis and Forecast

The USD/CHF pair remains under pressure at the start of the new week, attracting sellers for the second day in a row, weighed down by several factors. However, spot prices

Irina Yanina 17:35 2025-05-05 UTC+2

Could the Fed Deliver a Surprise Following Its Meeting? (Possible Renewed Decline in Oil Prices and GBP/USD Pair)

The turbulence of recent months, driven by Donald Trump's actions and the release of fresh U.S. economic data, has done little to help investors understand the true direction of asset

Pati Gani 09:50 2025-05-05 UTC+2

The Market Doesn't Dare to Go Against the Crowd

"Dance while the music plays." The S&P 500 has just completed a 9-day rally—the longest since 2024—driven by a strong U.S. labor market report and upbeat earnings from tech giants

Marek Petkovich 08:49 2025-05-05 UTC+2

GBP/USD Overview – May 5: Bank of England and Fed Meetings

The GBP/USD currency pair failed to show any decisive movement on Friday—it neither rose nor fell significantly. Many analysts interpreted the U.S. labor market and unemployment data as positive simply

Paolo Greco 06:44 2025-05-05 UTC+2

EUR/USD Overview – May 5: A New Week of Ordeals for the Dollar

The EUR/USD currency pair remained flat on Friday. The day saw both upward and downward movements. It is a notable achievement for the dollar that it has appreciated over

Paolo Greco 06:44 2025-05-05 UTC+2

EUR/USD: Weekly Preview. The May FOMC Meeting and (Possible) U.S.-China Trade Talks

The new week promises to be informative for EUR/USD traders. Most notably, the next Federal Reserve meeting, scheduled for May 6–7, will determine the central bank's future course of action

Irina Manzenko 05:53 2025-05-05 UTC+2

What to Pay Attention to on May 5? A Breakdown of Fundamental Events for Beginners

Very few macroeconomic events are scheduled for Monday. The only noteworthy release is the ISM Services PMI from the U.S., but serious doubts exist about whether the market will

Paolo Greco 04:15 2025-05-05 UTC+2

The U.S. Dollar: Weekly Preview

The hit parade of American news and events will continue. I still believe that the most significant factor in the market is Donald Trump's decisions. It's enough to compare

Chin Zhao 00:51 2025-05-05 UTC+2

British Pound: Weekly Preview

Recent reviews for both instruments have become predictable and even somewhat dull. The entire set of factors capable of influencing market sentiment and instrument movement boils down to the President

Chin Zhao 00:51 2025-05-05 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.