GBP/USD Holds $1.34 as CPI Nears and $1.35 Ceiling Shape Next Move
The British pound is entering a decisive phase as cooling labor data collides with stubborn inflation risks. With GBP/USD...
Quick overview
- The British pound is facing a critical moment as mixed labor data and persistent inflation risks create uncertainty.
- UK labor data showed a rise in claimant counts and a slight easing in wage growth, indicating a cooling labor market.
- Attention is now on the upcoming UK CPI report, which could significantly influence GBP's direction depending on whether inflation rises or falls.
- GBP/USD is consolidating near $1.34, forming a triangle pattern that reflects market indecision and potential volatility.
The British pound is entering a decisive phase as cooling labor data collides with stubborn inflation risks. With GBP/USD consolidating near key technical levels, macro releases are beginning to outweigh short-term momentum, setting up a potential volatility event around UK CPI.
Rising claimant counts and easing wages reshape expectations
Tuesday’s UK labor data delivered a mixed but market-relevant signal. The Claimant Count Change rose by 17.9K, well above the 15.6K forecast, reversing sharply from the prior -3.3K reading. While not yet a deterioration in employment, the increase suggests labor market tightness is easing.
Wage growth reinforced that message. Average Earnings (3m/y) came in at 4.7%, slightly above expectations but down from 4.8% previously. Earnings excluding bonuses rose 4.5% y/y, matching forecasts. Together, the data points to gradual cooling rather than renewed inflation pressure from wages.
BoE Governor Andrew Bailey echoed that balance in his remarks, offering no firm timeline but stressing a data-dependent approach. Markets took the message as neutral, keeping rate-cut expectations alive but firmly tied to inflation outcomes.
Why CPI is now the key driver for sterling
Focus now turns to UK CPI, due Wednesday, with headline inflation forecast at 3.3% y/y, up slightly from 3.2% previously. Inflation remains well above the BoE’s 2% target, though officials have suggested it could normalize by mid-2026 if current trends persist.
For GBP, the risk profile is uneven. A firmer CPI print could delay easing expectations and support the pound near recent highs. A softer reading would strengthen the case for policy cuts later this year, potentially pressuring GBP through established support zones.
GBP/USD compresses inside a triangle near $1.34
Technically, GBP/USD reflects this macro indecision. The pair is trading near $1.3436, consolidating after failing to sustain a move above $1.3491. Price remains capped by a descending trendline from the $1.3567 swing high, while buyers continue to defend the $1.3340 demand area.
This price action is forming a triangle-like consolidation, with rising support and falling resistance compressing volatility. Recent candlesticks between $1.3430–$1.3450 show smaller bodies and overlapping wicks, signaling hesitation rather than trend commitment. The 50 and 200 EMAs are flat and overlapping near $1.3435, reinforcing short-term balance. RSI holds in the 51–59 range, pointing to neutral momentum without divergence.
US headlines keep the dollar reactive
On the US side, dollar moves remain headline-driven. President Donald Trump’s comments on trade and geopolitics have injected short-term volatility but no sustained direction. Later, US Pending Home Sales are expected at -0.3% m/m, down sharply from +3.3%, which could add mild pressure to the dollar if confirmed.
Trade idea: Buy a confirmed break above $1.3485, target $1.3530, stop below $1.3430.
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