Pound Sterling declines against US Dollar after UK employment data

• The Pound Sterling declines against the US Dollar on mixed UK employment data for the three-months ending May.
• UK wage growth slowed down, as expected, and the ILO Unemployment Rate accelerated to 4.7%.
• US President Trump denied reports stating that he will fire Fed's Powell soon.

The Pound Sterling (GBP) declines against the US Dollar (USD) on Thursday, trading below 1.3400, as the United Kingdom (UK) Office for National Statistics has reported mixed employment data. The report showed that the number of workers added by employers in the three-months ending May came in higher at 134K than the prior reading of 89K. However, the ILO Unemployment Rate has increased to 4.7%, above expectations and the prior reading of 4.6%.

Investors were anticipating a weak set of employment numbers as the latest survey from the Recruitment and Employment Confederation trade body and accountants KPMG signaled that the availability of individuals for jobs has increased significantly.

The hiring had been slowed down in recent months as business owners were offsetting the impact of an increase in employers' contribution to social security schemes announced by the Chancellor of the Exchequer in the Autumn Statement.

Average Earnings (Excluding and Including) bonuses rose by 5% on year, majorly in line with market expectations, but have slowed down from readings seen in the three-months ending April.

Easing Average Earnings, a key measure of wage growth, is expected to offer slight relief to Bank of England (BoE) officials, who have become worried about the inflation outlook, following the release of the hotter-than-projected Consumer Price Index (CPI) report on Wednesday. The report showed that both headline and the core CPI rose at a faster pace on year to 3.6% and 3.7%, respectively.

Daily digest market movers: Pound Sterling weakens against US Dollar

• The Pound Sterling is down 0.25% against the US Dollar on Thursday, trading close to an almost two-month low around 1.3360. The GBP/USD pair is under pressure due to deteriorating UK labor market conditions and a firm US Dollar.
• At the time of writing, the US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, trades 0.5% higher to near 98.80.
• The US Dollar gains as United States (US) President Donald Trump has denied reports stating that he will fire Federal Reserve (Fed) Chair Jerome Powell. However, Trump continued to criticize him for not lowering interest rates.
• US President Trump acknowledged in an interview with the Real America's Voice network on Wednesday that Powell's dismissal by him could cause upheaval in markets. "I'd love if he wants to resign, that would be up to him. They say it would disrupt the market if I did," Trump said.
• The report from Reuters on Wednesday stating that Trump received a positive response after polling some Republican lawmakers on firing Powell led to a sharp decline in the US Dollar and US equity markets.
• Meanwhile, comments from a couple of Fed officials pointing to de-anchoring consumer inflation expectations have also strengthened the US Dollar. New York Federal Reserve (Fed) Bank President John Williams and Atlanta Fed Bank President Raphael Bostic warned that the impact of tariffs on inflation has just started building up, and it will accelerate going ahead.
• "It's early days for impact of tariffs on economy, which is modest so far but will increase over time," New York Fed Bank President John Williams said in a speech at the New York Association for Business Economics on Wednesday. He warned that tariffs should boost inflation by "one percentage point rest of 2025 into 2026".
• Going forward, investors will focus on the US Retail Sales data, a key indicator of consumer spending, for June, which will be published at 12:30 GMT. The consumer spending measure is expected to have grown by 0.1% after declining 0.9% in May.

Technical Analysis: Pound Sterling trades below 1.3400

The Pound Sterling declines to near 1.3370 against the US Dollar, the lowest level in almost two months. The near-term trend of the GBP/USD pair is bearish as it trades below the 20-day and 50-day Exponential Moving Averages (EMAs), which trade around 1.3525 and 1.3470, respectively.

The 14-day Relative Strength Index (RSI) oscillates below 40.00, indicating a strong bearish momentum.

Looking down, the May 12 low of 1.3140 will act as a key support zone. On the upside, the July 11 high around 1.3585 will act as a key barrier.