GBP/USD extends downside below 1.3500 ahead of US CPI release

• GBP/USD softens to around 1.3475 in Wednesday's Asian session. 
• UK Unemployment Rate ticked higher to 4.6% in three months to April; Claimant Count Change arrived at 33.1K in May.
• US and China agreed on a plan to ease trade tensions.

The GBP/USD pair extends the decline to around 1.3475 during the Asian trading hours on Wednesday. The Pound Sterling (GBP) weakens against the US Dollar (USD) due to a weaker UK employment report. Later on Wednesday, the attention will shift to the US May Consumer Price Index (CPI) inflation.

The UK ILO Unemployment Rate ticked higher to 4.6% in the three months to April versus 4.5% prior, the UK Office for National Statistics showed on Tuesday. This figure came in line with the expectations. Meanwhile, the Claimant Count Change came in at 33.1K in May versus -21.2K prior (revised from 5.2K), below the consensus of 9.5K.

Additionally, Average Earnings, excluding Bonus, in the UK increased 5.2% three months year-over-year (3M YoY) in April, compared to a revised 5.5% growth seen in the previous reading. The market forecast was for a 5.4% reading. Average Earnings, including Bonus, rose by 5.3% in the same period after accelerating by a revised 5.6% in the quarter through March. The data missed the estimate of 5.5%.

These figures indicated that the UK labor market is losing steam under pressure from the government's tax and minimum wage hikes. This, in turn, could exert some selling pressure on the Cable in the near term. "This gradual cooling in pay growth may offer some reassurance to the Bank of England, following last month's inflation reading unexpectedly jumping to its highest level in over a year," said Paige Tao, an economist at PwC UK.

On the USD front, easing trade tension between the United States and China provides some support to the Greenback. Bloomberg reported early Wednesday that the US and China agreed to a preliminary deal on how to implement the consensus the two sides reached in Geneva. However, the tariff uncertainty remains as the full details of their agreement weren't immediately available. Any signs of renewed fear of trade tensions could weigh on the USD and help limit the pair's losses.