- There are no UK or US tier-1 releases on Monday
- On Tuesday, UK releases jobs data and BoE’s Bailey testifies before House of Lords committee
- US releases inflation data on Tuesday, with Fed rate announcement on Wednesday
The British pound has started the week quietly. Tuesday promises to be busy, with key releases on both sides of the pond. The UK releases May employment data and Bank of England Governor Bailey testifies before a House of Lords Committee. In the US, the markets are anxiously awaiting Tuesday’s inflation report, which comes just one day before the Fed rate announcement.
UK jobs numbers could point in different directions
The UK labour market has proven resilient to the BoE’s aggressive tightening cycle. This has become too much of a good thing for the BoE, as inflation remains stubbornly high, although it did fall to 8.7% in May, down from 10.1% in April. The good news for the BoE is that the labour market appears to be cooling, and that should help reduce inflation.
The markets are expecting mixed numbers in May. The unemployment rate is expected to rise from 3.9% to 4.0% and employment change is projected to fall from 182,000 to 150,000. At the same time, wage growth including bonuses is expected to rise from 5.8% to 6.1% and unemployment claims are expected to drop. If the data turns out to be a mixed bag, it will be interesting to see Governor Bailey’s take when he testifies before the House of Lords committee.
In the US, inflation is expected to continue to ease in May. Headline inflation is expected to fall from 4.9% to 4.1%, and the core rate is projected to ease from 5.5% to 5.3%. Market rate pricing is swinging, with the probability of a pause rising from 70% on Friday to as high as 80% earlier today, according to the CME’s FedWatch. We can expect the Fed to take a pause after ten straight rate hikes, unless there is a huge inflation surprise to the upside.
If the Fed stays on the sidelines, the markets will be looking for clues as to what happens next. The Fed may decide to pause on Wednesday but leave the door wide open for further rate hikes, as early as in July. There seems to be some support amongst Fed members for more tightening, and a pause tomorrow may turn out to be a short skip ahead of more rate increases in the second half of the year.
- There is resistance at 1.2645 and 1.2734
- 1.2513 and 1.2436 are providing support
Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at firstname.lastname@example.org. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.