GBP/USD Falls Toward 1.3450 As Soft UK Jobs Data And US-China Trade Talks Shift Sentiment
GBP/USD lost ground on Tuesday, sliding to as low as 1.3450 after a sharp market reaction to weaker-than-expected UK labor market figures. The pair, which had traded as high as 1.36 in recent sessions, saw its recent bullish momentum fade, even as broader US Dollar softness and Euro strength had previously supported Sterling. The Pound’s move was compounded by disappointing retail sales and lingering uncertainty over global trade dynamics, with traders closely monitoring both domestic and external catalysts for direction.
UK Labor Market Weakness Raises Rate Cut Expectations For The BoE
Fresh UK labor market data triggered a sell-off in GBP/USD, with the unemployment rate rising to 4.6%—its highest since August 2021—from 4.5%, in line with expectations. However, wage growth disappointed sharply, with average earnings excluding bonuses slowing to 5.2%, missing both prior levels of 5.5% and consensus forecasts of 5.4%. This softness in pay growth suggests cooling domestic inflationary pressures and undermines the case for a prolonged Bank of England (BoE) pause on rates. The number of payroll employees fell by a provisional 109,000 in May, following April’s 55,000 decline—deepening concerns about underlying labor market health.
Market participants responded by raising the probability of an August BoE rate cut. Traders now see a stronger likelihood of back-to-back cuts between June and August. Danske Bank flagged that the data casts doubt on the BoE’s previously hawkish bias. The Pound struggled as markets adjusted to this dovish tilt, dragging GBP/USD toward the 1.3450 zone.
GBP/USD Reacts To Poor Retail Sales And Mounting Global Pressures
Sterling’s troubles were not confined to jobs data alone. The latest BRC Retail Sales Monitor showed annual growth of just +0.6% in May—well below the 2.7% forecast—adding another bearish layer to the Pound’s profile. The weak retail figures reinforced concerns about UK consumer strength and domestic demand.
Meanwhile, with GBP/USD trading around 1.3489 earlier in the session, technical signals had already turned cautious. Daily RSI retreated and momentum indicators warned of a potential corrective phase. Support is now eyed at 1.3440–1.3460, with deeper levels around 1.33 if selling pressure accelerates. Resistance levels remain at 1.3620 and 1.3750, with bulls now needing fresh catalysts to reattempt a breakout toward the prior three-year peak near 1.36.
US-China Trade Optimism Lifts Dollar, Weighs On Sterling
External drivers also played a decisive role in GBP/USD dynamics on Tuesday. The US Dollar firmed as traders reacted to renewed optimism over US-China trade talks underway in London. Comments from US Treasury Secretary Scott Bessent calling Monday’s meeting “good” helped lift the Greenback. Expectations that the US may ease chip export restrictions in exchange for China loosening rare earth export controls buoyed risk appetite but also boosted dollar demand.
The broader DXY index hovered near 99.00, with traders eyeing a potential push toward 99.20 or even the 100.20–100.40 range if US macro data surprises to the upside. This dollar strength added further headwinds for GBP/USD, contributing to the pair’s retreat below 1.35.
GBP/USD Faces Key Tests Ahead Of US Inflation Data
Looking ahead, GBP/USD direction will hinge heavily on upcoming US inflation releases. Core CPI is forecast to rise from 2.8% to 2.9%, while headline CPI is expected to climb from 2.3% to 2.5%. If these figures meet or exceed expectations, the dollar could gain further, placing additional pressure on Sterling. Absent UK data, the Pound will be reactive to broader global sentiment and USD movements.
Meanwhile, despite Tuesday’s pullback, GBP’s longer-term trend remains constructive. The pair is still up over 9% in the past four months and remains in a broader uptrend from the 2022 low of 1.3051. Current medium-term targets include the 61.8% Fibonacci projection at 1.4004, though this path hinges on holding above the 55-week EMA at 1.2913.
Traders Eye GBP/USD Technical Setup Amid Consolidation
Short-term technicals suggest GBP/USD may consolidate within the 1.3420–1.3615 range. The pair’s prior rally from 1.2099 would see fresh bullish legs if 1.3615 breaks, targeting the 1.3813 level based on prior Fibonacci projections. However, bearish divergence on the 4-hour MACD and inability to hold above 1.3500 increase near-term downside risk. A break of 1.3414 would confirm short-term topping and open room for deeper correction toward 1.3138 support.
Intraday flows also reflected positioning adjustments, with some traders taking profits after the recent run toward 1.36. Without fresh UK macro catalysts in the near term, external themes—chiefly US CPI and trade headlines—are likely to dominate GBP/USD trading in the coming sessions.
GBP/USD Outlook: Data And Dollar To Dictate Next Move
Tuesday’s drop toward 1.3450 followed an earlier move to 1.36 highs, as Sterling bulls lost momentum amid a confluence of weak UK jobs and retail data, renewed BoE easing expectations, and a firmer dollar backdrop. With markets eyeing key US inflation prints and awaiting clarity from ongoing US-China trade negotiations, GBP/USD now trades in a tactical range, vulnerable to further downside if US data surprises hawkishly.
Yet structurally, the Pound’s longer-term trajectory remains positive, underpinned by resilient risk appetite (with FTSE 100 near record highs) and expectations that BoE cuts will be gradual rather than aggressive. Near-term volatility will hinge on the dollar’s path and global risk sentiment shifts, as traders remain alert to the next move in this heavily watched FX pair.
