US CPI Falls Short of Expectations; UK Labor Market Sees Slowdown
- US Consumer Price Index (CPI) misses forecasts, raising questions about two expected Fed cuts in 2025 and hints of stronger core inflation.
- UK labor market appears to be cooling as wage growth slows to 5.6%, the lowest since November 2024, alleviating pressure on the Bank of England (BOE).
- Boe policy gap narrows; GBP/USD benefits from a weaker dollar and steady expectations from the BOE.
The Pound Sterling (GBP) bounced back from earlier losses on Monday, climbing over 0.35% against the US dollar (USD) following the recent inflation data in the US. After touching a daily low of 1.3165, GBP/USD is currently trading at 1.3226.
Sterling Gains Ground as US Inflation Surprises; UK Employment Data Reflects BOE’s Caution
The US CPI for April came in slightly below projections for both headline and core figures. Specifically, the CPI was at 0.2%, falling short of the anticipated 0.3%. Core CPI, however, was reported at 0.2%, up from a forecast of 0.3%.
Moreover, inflation rates are up by 2.3% year-on-year, with core metrics at 2.8%. While some analysts suggest that April’s figures might indicate the influence of tariffs, economists from Bank of America noted that “a significant uptick in inflation is in the pipeline.”
In the UK, recent employment statistics illustrate a cooling job market, offering some relief to the BOE. Although the number of employees dropped by around 33,000, wage growth for the three months ending in March reached 5.6%, marking the slowest growth since November 2024.
Huw Pill, the BOE’s chief economist, expressed ongoing concerns about underlying inflation pressures, particularly regarding second-round effects. He stands as one of the most hawkish members and opposed the BOE’s recent interest rate cuts.
The divergence between central bank policies is influencing GBP/USD rates.
In the meantime, data from the Chicago Trade Commission (CBOT) indicates that market participants are adjusting expectations regarding the Federal Reserve (Fed). Current futures contracts for December 2025 suggest around 54 basis points of easing.
For the BOE, market expectations point to about 48.6 basis points of changes by year-end, with no alterations anticipated at the next BOE meeting in June.
GBP/USD Price Forecast: Technical Perspective
The bullish trend for GBP/USD remains solid, even as it hovers below the 20-day simple moving average (SMA) at 1.3301. Recent momentum shifts, as shown by the relative strength index (RSI), hint at potential profit extension.
The initial resistance faces the 20-day SMA. Although this level has been tested, buyers need to surpass it and also break through the 1.3350 barrier. The next target is 1.3400. On the downside, if GBP/USD stays beneath 1.3301, sellers may eye a retest of this week’s low at 1.3194, ahead of the 50-day SMA at 1.3089.
(This story was revised to clarify that the BOE Chief Economist’s name is Huw Pill, not Hew.)
British Pound Movements This Week
The table below illustrates the British pound (GBP) exchange rate changes against major currencies this week, with the pound performing particularly well against the Japanese yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.72% | 0.29% | 1.08% | 0.56% | -0.68% | -0.07% | 0.84% | |
| EUR | -0.72% | -0.30% | 0.91% | 0.33% | -0.75% | -0.31% | 0.60% | |
| GBP | -0.29% | 0.30% | 1.37% | 0.63% | -0.45% | -0.08% | 0.91% | |
| JPY | -1.08% | -0.91% | -1.37% | -0.52% | -2.34% | -1.97% | -0.45% | |
| CAD | -0.56% | -0.33% | -0.63% | 0.52% | -0.97% | -0.63% | 0.28% | |
| AUD | 0.68% | 0.75% | 0.45% | 2.34% | 0.97% | 0.35% | 1.34% | |
| NZD | 0.07% | 0.31% | 0.08% | 1.97% | 0.63% | -0.35% | 0.89% | |
| CHF | -0.84% | -0.60% | -0.91% | 0.45% | -0.28% | -1.34% | -0.89% |
The heatmap illustrates how each major currency is performing. The base currency is on the left, while the comparative currency is along the top. For instance, if you trace GBP to USD, the change in the box shows the performance of GBP versus USD.
