The GBP/USD pair is trading with a slight bearish bias around 1.2730 as of Tuesday, with the US dollar weakening. Investors are waiting for the UK employment report for potential market movement, which is expected to show a contraction in May. Last week’s strong US employment data has led to speculation that the Fed may postpone any rate cuts this year.
The UK employment growth has been decreasing in recent months and is anticipated to continue in May, potentially prompting the Bank of England to lower borrowing costs. However, high Average Earnings could lead the central bank to delay any easing measures. Positive employment data in the UK could support the Pound Sterling in the short term.
The US employment data from last week has given rise to expectations that the Fed will keep interest rates steady for a longer period. This has bolstered the US Dollar in recent trading sessions. Futures traders are now pricing in a lower probability of a rate cut in September, following the release of the NFP data.
The upcoming US Consumer Price Index (CPI) inflation data on Wednesday will be crucial, as the Fed has indicated that they will wait for more inflation evidence before making any interest rate changes. The CPI figures are expected to show a YoY increase in both headline and core CPI. The Fed will announce its interest rate decision and update economic projections after the CPI reports are released. A hawkish stance from the Fed could strengthen the USD and pose a challenge for GBP/USD.