During the European session on Tuesday, the GBP/USD pair held relatively firm following the release of UK employment data but remained under slight pressure overall, trading around the 1.3525 level. Although the data released some positive signals, the market reaction was relatively restrained, indicating that investors are still awaiting more macroeconomic clues.
The data showed overall signs of improvement in the UK labour market. The ILO unemployment rate fell to 4.9%, significantly lower than the market expectation of 5.2%, reflecting ongoing resilience in the jobs market. Meanwhile, the number of employed people increased by approximately 25,000 in the three months to February. Although this was lower than the previous figure, it still represented positive growth, suggesting the economic fundamentals have not deteriorated significantly. Regarding wages, key wage growth indicators showed a mixed performance. Average earnings excluding bonuses increased by 3.6% year-on-year, slightly higher than expected but lower than the previous reading, indicating a slowdown in wage growth. In contrast, earnings including bonuses rose to 3.8%, surpassing market expectations and showing that income levels still provide some support. Overall, while the wage data was not uniformly strong, it remained within a relatively stable range.
The improvement in employment data has strengthened market expectations that the Bank of England will keep interest rates unchanged in the short term. A lower unemployment rate suggests the economy still has resilience, giving policymakers room to observe inflation trends rather than adjusting rates immediately. This expectation provides some support for the Pound but also limits its potential for significant gains.
Looking ahead, market focus is quickly shifting to the upcoming inflation data. UK CPI for March is forecast to accelerate to 3.3% year-on-year, up from the previous 3.0%, primarily driven by rising energy prices. Against the backdrop of Middle East tensions affecting energy markets, a rebound in inflation could further influence the Bank of England's policy path. If inflation comes in higher than expected, it could reinforce expectations for maintaining higher interest rates, thereby supporting the Pound; conversely, weaker data could undermine its performance.
Furthermore, preliminary UK PMI and retail sales data due this week will provide further insight into economic activity and consumption, offering additional clues about the economic outlook.
From a technical perspective, the daily chart shows GBP/USD operating within an uptrend, with the price still positioned above medium and long-term moving averages, indicating a generally bullish structure. The 1.3600 area constitutes key resistance overhead, having been tested multiple times without a breakthrough, suggesting upward momentum may be waning. On the downside, 1.3500 serves as important short-term support; a break below this level could lead to a further pullback towards the 1.3420 area. Momentum indicators show the MACD declining from high levels, indicating weakening bullish momentum.
On the 4-hour chart, the short-term trend shows a consolidation pattern, with the price oscillating repeatedly within the 1.3500 to 1.3600 range. The moving average system is flattening, indicating a lack of clear market direction. The RSI is in a neutral zone without extreme signals, suggesting that range-bound trading is likely to persist in the short term. A break above 1.3600 could lead to a continuation of the uptrend, while a break below 1.3500 might trigger a deeper correction.
Overall, GBP/USD is currently in a data-driven phase, with employment data providing support, but inflation and subsequent economic data will determine the next directional move.
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