The British Pound (GBP) has dropped against major currencies following reports of a softening UK labor market for the three months ending in September. The Office for National Statistics (ONS) revealed that the UK unemployment rate rose to 4.3%, up from 4.0% previously, exceeding expectations of 4.1%. Although wages grew faster than forecast, with earnings excluding bonuses up 4.8%, slower job growth and labor market cooling are weighing on GBP.
This labor market data could influence the Bank of England’s (BoE) policy direction, with traders speculating on a possible 25-basis-point rate cut in December. While the BoE has been cautious in easing rates, the persistent wage growth may still pose an inflationary concern, potentially impacting BoE’s future rate decisions.
GBP/USD reached a three-month low near 1.2800, pressured by both UK labor concerns and a strengthening US Dollar. The Dollar Index (DXY) hit a four-month high above 105.70, boosted by optimism over President-elect Trump’s economic agenda, which includes protectionist policies and corporate tax cuts that may lead to inflation, prompting the Fed to adopt a gradual rate-cutting path.
Technical Outlook
GBP/USD has dropped below its 200-day EMA at 1.2860, marking a shift to a bearish trend with potential further downside. Support lies around the August low at 1.2665, while resistance is expected near 1.3000.