GBP weekly forecast

Sterling began the week sluggishly, with a lack of UK economic data leaving the currency without direction.

We saw the latest UK jobs data take center stage on Tuesday. Unemployment surprised markets as it increased to 4.4% from February to April, posting higher than the market forecasts of 4.3% and showing the fourth consecutive increase in the British unemployment rate. Indications of a weakening UK labour market initially soured Sterling sentiment, however, a stronger-than-forecast batch of wage growth data helped to cushion GBP’s losses.

Average earnings, excluding bonuses, printed as forecast at 6%, in the 3 months before April, while the figures including bonuses exceeded expectations at 5.9%, rather than the predicted retraction at 5.7%. Persistent wage inflation led markets to speculate on how the Bank of England might respond to stubbornly high wages, which helped to offset potential losses for GBP.

The UK's latest GDP data was released on Wednesday, showing that growth stalled in April as expected. This deterred investor interest in the Pound, leaving it largely rangebound for much of the day.

Sterling remained flat on Thursday as the absence of data releases left the currency susceptible to external fluctuations. The release of the Labour Party manifesto also disappointed markets.

The week ended with limited economic data, keeping GBP mostly subdued. However, postponed expectations of a Bank of England interest rate cut appeared to support Sterling. Economists still seem to favor August or September for the BoE's first interest rate cut, indicating that any expectations of a rate cut in June have diminished.

Looking ahead, inflation data from the UK is scheduled for release this week. Meanwhile, UK headline inflation is expected to ease to 1.9%, dropping below the central bank’s 2% target rate. This could push markets to reassess their current rate cut expectations, potentially influencing GBP exchange rates.

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