GBP/USD Price Forecast: Flattens around 20-day EMA ahead of UK employment data
- GBP/USD wobbles around 1.3640 ahead of the UK labor market data on Tuesday.
- UK ILO Unemployment Rate is expected to have remained steady at 5.1% in three months ending December.
- US inflation grew at a slower-than-expected pace in January.
The GBP/USD pair trades flat around 1.3640 during the early European trading session on Monday. Cable trades calm as investors await the release of the United Kingdom (UK) labor market data for three months ending December, which is scheduled for Tuesday.
The UK labor market report is expected to show that the ILO Unemployment Rate remained steady at 5.1%. Average Earnings Including Bonuses, a key measure of wage growth, is estimated to have grown at a moderate pace of 4.6% Year-on-Year (YoY).
Signs of weak labor demand and slowing wage growth would prompt expectations for an interest rate cut by the Bank of England (BoE) in the near term. In the policy meeting earlier this month, the BoE decided to leave interest rates unchanged at 3.75%, with a 5-4 split, and reiterated that the monetary policy will remain on a “gradual downward path”.
Meanwhile, the US Dollar (USD) trades broadly stable as dovish Federal Reserve (Fed) expectations for the March and April policy meetings remain steady despite United States (US) inflation cooling down at a faster-than-expected pace in January.
AUD/USD technical analysis
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GBP/USD trades flat at around 1.3648 as of writing. Price holds above the 20-day EMA at 1.3619, keeping a positive near-term bias. The average is turning higher and recent dips have been absorbed near the line. RSI at 55 (neutral) has eased from earlier overbought readings, signaling moderated but still supportive momentum. The rising trend line from 1.3344 underpins the advance, offering support near 1.3591.
The descending trend line from 1.3889 caps gains, with resistance at 1.3657. A daily close above that barrier could confirm a trend-line break and extend the recovery, while a failure there would keep the pair contained beneath the line. Momentum confirmation remains key; RSI holding above 50 would favor upside continuation, whereas a softening toward 50 would keep range conditions in place.
(The technical analysis of this story was written with the help of an AI tool.)
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.