The sterling pound collapses after bad employment data in the United Kingdom

• The sterling pound collapses in front of its main peers after the publication of the weak data of the United Kingdom labor market for the three months that ended in April.
• The Ilo UK unemployment rate accelerated to 4.6%, the highest level seen since July 2021.
• Investors seek the minutes of the commercial meeting between the US and China to obtain new clues about the prospects of the US dollar.

The sterling pound (GBP) faces a strong sales pressure in front of its peers on Tuesday after the United Kingdom National Statistics Office (ONS) reported that the labor market cooled in the three months that ended in April.

The data showed that the economy added new workers, less than the 112K seen in the quarter that ended in March. The Ilo unemployment rate accelerated to 4.6%, as expected, from the previous publication of 4.5%. This is the highest level in the unemployment rate seen since July 2021. The slowdown in employment growth in the United Kingdom reflects the impact of the increase in employers’ contributions to social security schemes.

The Treasury Chancellor of the United Kingdom, Rachel Reeves, increased the contribution of employers to the National Insurance (Ni) from 13.8% to 15% in the Autumn Declaration, which entered into force in April.

After publishing the labor market data, the ONS declared that “some companies may not be hiring new workers or replacing those who leave.”

Meanwhile, the average gains, a key measure of salary growth that promotes inflation in the service sector, have grown at a modest rhythm. The average earnings excluding bonuses increased by 5.2%, slower than estimates of 5.4%and the previous 5.5%reading, decreased down from 5.6%. The salary growth measure that includes bonuses grew at a slower pace of 5.3%, compared to the expectations of 5.5%and the previous 5.6%publication, upside down from 5.5%.

The slower salary growth and a slowdown in labor demand is expected to encourage the officials of the Bank of England (BOE) to reassess their guide that the Central Bank will follow an “gradual and cautious” monetary expansion approach, which they delivered in May after reducing interest rates by 25 basic points (PBS) to 4.25%.

Meanwhile, traders trust that the BOE will keep the stable interest rates at 4.25% at the Monetary Policy Meeting of June 19. However, market experts anticipate that weak labor data have increased the probabilities of cuts in interest rates in monetary policy meetings later this year. According to Dutch bank analysts ING, weak employment data “help consolidate cuts in August and November.”

This week, investors should be prepared for more volatility in the British currency, since the monthly data of the Gross Domestic Product (GDP) and the manufacturing industry for April are scheduled for publication on Thursday.

What moves the market today: the sterling pound weakens against the US dollar, the commercial conversations between the US and China in the focus on the focus

• The sterling pound collapses to about 1,3456 against the US dollar (USD) during the European negotiation hours on Tuesday. The US dollar trades calmly against its main peers, while investors expect the result of commercial discussions between the United States (USA) and China, which began on Monday. The US dollar index (DXY), which tracks the value of the dollar against six main currencies, rises to about 99.00.
• The US dollar had a strong increase before commercial conversations between the US and China in Geneva a few weeks ago. Investors seem to be reluctant to buy for optimism this time, since they want concrete commercial terms. “An agreement to keep talking could be better than anything, but unless we see a concrete advance, the impact on feeling will probably remain moderate,” Markets Saxo analysts said, according to Reuters.
• Meanwhile, the White House has expressed confidence that a positive result will be achieved after the commercial meeting between the US and China. The US National Economic Advisor, Kevin Hasett, declared in an interview with CNBC on Monday that “export controls will be relieved and rare earth will be released in volume” after the meeting.
• In the front of the economic calendar, investors expect the US Consumer Price Index (CPI) for May, which will be published on Wednesday. The IPC report is expected to show that general inflation increased at a faster rate of 2.5% per year, compared to a 2.3% growth seen in April. In the same period, it is anticipated that the underlying CPI, which excludes volatile food and energy prices, accelerates 2.9% from the previous reading of 2.8%. These inflation figures will probably influence market expectations on the monetary policy of the Federal Reserve (FED).
• According to the CME Fedwatch tool, it is unlikely that the US Central Bank will reduce interest rates before the September monetary policy meeting.

Technical Analysis: The sterling pound seeks to maintain the 20 -day Ema

The sterling pound falls to about 1,3456 against the US dollar on Tuesday after failing to review the maximum of three years of 1,3617. The perspective For the pair it has become uncertain since it has descended to the 20 -day exponential (EMA) mobile average, which oscillates around 1,3467.

The 14 -day relative force index (RSI) faces pressure about 60.00, indicating that the bullish potential is limited.

On the positive side, the maximum of January 13, 2022 of 1,3750 will be a key obstacle to the pair. Looking down, the horizontal line drawn from the maximum of September 26, 2024 of 1,3434 will act as a key support zone.