- GBP/USD is set to drop as traders focus on upcoming UK employment data.
- The US dollar benefits from Fed expectations amid rising interest rate probabilities for July.
- Recent inflation figures from the UK have enhanced the chances that the Bank of England will keep its tight monetary policy.
GBP/USD has lost value after a profitable session earlier, currently hovering around 1.3390 during Thursday’s Asian trading hours. Traders are keeping an eye on a UK employment report that will include changes in claims for June and ILO unemployment rates for the three months leading up to May.
The GBP/USD pair has weakened as the US dollar sees some strength, maintaining its overnight interest rate amid solid inflation data from the U.S. The Federal Reserve is keeping its rates steady in the range of 4.25% to 4.50% at the upcoming July policy meeting.
Dallas Fed President Rory Logan mentioned on Tuesday that the Fed might need to hold rates for a while to ensure inflation stays low, particularly in light of upward pressures from tariffs. New York Fed President John Williams added later that the current monetary policy seems appropriately positioned to allow for careful economic monitoring before making any further decisions.
Interestingly, the US Producer Price Index (PPI) remained unchanged, even against a market expectation of a 0.2% increase in June. On the other hand, core PPI saw a 2.6% year-over-year rise, slightly softer than the projected 3.0%. As we look ahead, traders’ attention is likely to shift to US retail sales for June, alongside weekly unemployment claims later in the day and the Philadelphia Fed’s manufacturing index.
The latest Fed Beige Book highlights overall healthy business activity, with modest inflation pressures. However, there’s an underlying caution, as costs remain a concern for businesses.
As for the GBP/USD, its downside might be moderated due to anticipated UK inflation data that could strengthen the outlook for the Bank of England (BOE) to maintain its restrictive policy. But the BOE might discuss a more balanced approach during its interest rate meeting in August, particularly with rising price pressures and a cooling labor market.
