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12 June 2025,02:44

Daily Market Analysis

Sterling Slips as UK Labour Market Softens

12 June 2025, 02:44

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Key Takeaways:

*The UK labour market is weakening, with rising unemployment and slower wage growth reinforcing dovish BoE expectations.

*Markets now fully price in two BoE rate cuts by year-end, as fiscal headwinds and soft growth weigh on sentiment.

*Sterling remains under pressure as resilient U.S. data and eurozone outperformance highlight GBP’s relative weakness.

Market Summary:

The British pound weakened against the U.S. dollar after the latest UK labour market data pointed to rising unemployment and slowing wage growth—adding to expectations that the Bank of England (BoE) will cut rates further this year. The softening economic backdrop has reinforced concerns over the UK’s post-pandemic recovery momentum.

The unemployment rate climbed to 4.6% in May, its highest since mid-2021, while payroll employment saw its first decline in over a year. At the same time, regular wage growth eased to 5.2%, missing market forecasts and signaling a moderation in domestic inflationary pressures. These developments have strengthened the view that the BoE may adopt a more dovish stance in upcoming meetings.

Markets are now pricing in at least two BoE rate cuts before year-end, with expectations for moves as early as August. Analysts note that the central bank’s cautious easing path could accelerate if growth continues to falter. Fiscal policy has also added to headwinds, with the rise in employer National Insurance contributions reportedly discouraging hiring.

Although the BoE is expected to hold rates steady at its June 19 meeting, any dovish shift in tone—particularly if this week’s GDP figures disappoint—could weigh further on sterling. Broader macro trends, including resilient U.S. data and a stronger euro, have also put pressure on the pound in the short term.

Technical Analysis

GBPUSD, H4

GBP/USD slips below the 1.3520 support zone, extending its recent pullback from the June peak near 1.3600. The pair’s failure to hold above this prior consolidation base signals growing bearish pressure, with downside risks emerging toward 1.3400 if selling persists.

Momentum indicators continue to deteriorate. The RSI has dropped to 39—below the neutral 50 line and edging toward oversold territory—signaling mounting bearish momentum. Meanwhile, the MACD remains in negative territory with the signal line drifting lower, reinforcing downside bias as momentum fades.

The price reaction around 1.3470 now acts as immediate resistance, and failure to reclaim this level may keep the bears in control. A sustained break below 1.3450 could expose further losses toward 1.3340. However, if upcoming UK data or BoE commentary surprises hawkishly, a rebound toward 1.3520 remains possible, though likely capped by the broader downtrend.

Resistance levels:1.3520, 1.3565

Support levels: 1.3450, 1.3340

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