Pound price remains steady as wage growth accelerates and unemployment rises
Pound steady amid UK wage growth and unemployment rise
The pound sterling maintained its stability against major currencies on Tuesday, following data from the UK Office for National Statistics (ONS) indicating robust wage growth amidst rising unemployment. Average Earnings excluding bonuses increased by 5.6% in the three months ending November, exceeding forecasts of 5.5%.
The inclusion of bonuses also reflected the same growth rate. However, the UK labor market showed signs of strain, with only 35,000 new jobs added compared to 173,000 in the previous quarter, and the unemployment rate rose to 4.4%.
GBP/USD price dynamics (Dec 2024 - Jan 2025) Source: TradingView.
Impact of wage growth and labor data on BoE policy
The Bank of England (BoE) closely monitors wage growth due to its inflationary implications. The stronger-than-expected earnings data could counterbalance the recent expectations of a 25-basis-point interest rate cut in February. However, subdued labor demand, amplified by employer discontent over increased National Insurance contributions, may temper inflationary risks and impact monetary policy decisions.
The Pound Sterling struggled to sustain recovery against the U.S. dollar, retreating to 1.2275 after reaching a 10-day high of 1.2344. President Donald Trump’s delay in imposing universal tariff hikes momentarily weakened the dollar’s outlook. Nonetheless, market participants are split on the Federal Reserve’s next moves, with a 50% probability of holding interest rates at 4.25%-4.50% through May, according to the CME FedWatch tool.
Technical outlook: Resistance and support levels
GBP/USD failed to reclaim the 20-day Exponential Moving Average (EMA) at 1.2360. The Relative Strength Index (RSI) rebounded above 40, indicating diminishing bearish momentum. Immediate support lies at the October 2023 low of 1.2050, while the 1.2400 resistance level could act as a key barrier for upward movement.
In previous discussions, we examined the Pound’s challenges amid weak UK economic data and dovish BoE sentiment, which remain pivotal to the currency's trajectory.
