GBP/USD continues to decline for the second straight day on Tuesday, as weak data from the United Kingdom supports the case for reduced interest rates by the Bank of England. The ongoing government shutdown in the US results in a lighter schedule, with the exception of Federal Reserve Chair Jerome Powell’s upcoming speech.
The UK jobless rate has increased to 4.8%, reflecting a significant slowdown in hiring momentum according to the latest report. Traders are resisting the notion of easing expectations from the Bank of England, even in light of soft labor data and indications of sluggish growth. The US Dollar remains stable in anticipation of Powell’s speech, amidst a decline in US business sentiment, indicating a potential slowdown.
> Sterling declines for a second consecutive day as unemployment increases and wage growth slows, reinforcing dovish expectations : The Sterling is currently positioned at approximately 1.3300, having reached a daily high of 1.3352 but unable to surpass last Friday’s peak of 1.3370, in the wake of the most recent employment report. The data indicated an increase in the unemployment rate, alongside a deceleration in wage earnings over the three months leading up to August. The ILO Unemployment Rate in August rose from 4.7% to 4.8% month-over-month, while the Employment Change decreased from 232K to 91K, falling short of the estimated 123K people added to the workforce. Further data indicated that Average Weekly Earnings in the three months to August increased from 4.7% to 5%. However, when excluding bonuses, there was a decline from 4.8% to 4.7% during the same period. This data presents justifications for the doves at the Bank of England to consider a reduction in interest rates. Despite this, market participants continue to express skepticism regarding any additional easing this year, anticipating the next cut to occur by March 2026.
Trade tensions between the US and China have led to a decline in the US Dollar, as illustrated by the US Dollar Index, which measures the dollar’s value against six currencies, decreasing by 0.07% to 99.17. Market participants are closely monitoring Fed Chair Jerome Powell’s speech scheduled for later in the day. In September, data indicated a decline in small business sentiment, attributed to expectations of unfavorable operating conditions over the next six months, as reported by the National Federation of Independent Business. The NFIB Business Optimism Index decreased by 2 points to 98.8 last month, marking the first decline in three months.