Pound Sterling Decline Amid Weak UK Employment Data

Fundamental Analysis

* Sterling Stumble: The British Pound has resumed its downward trend against the dollar, following lackluster UK employment data. This has fueled speculation that the Bank of England could initiate rate cuts sooner than expected, leading to a decline in the value of the GBP.The number of claimants for unemployment benefits rose less than anticipated, while wage growth slowed to 6% year-on-year in the three months leading up to February, down from 6.1% in the previous period. However, the most concerning aspect was the increase in the unemployment rate to 4.2%, which fell short of market expectations of remaining at 4% and was up from the previous month. At the same time, the strength of the U.S. dollar persists, driven by increased US Treasury yields.

Technical Analysis

* Technical Breakout: GBP/USD was traded lower following prior breakout below the previous support level 1.2520. MACD which illustrates bearish momentum signal with bearish market structure breakout suggest the pair to extend its losses further.

* Resistance and Targets: If the bearish momentum persists, there’s a strong likelihood that the price will potentially head towards 1.23200. Conversely, a breach above the level 1.25050 would indicate the potential reversal for the pair and potential head towards the resistance level 1.27850.

Understand how technical analysis can help you in this trading opportunity.

Potential Risks

Moving ahead, markets are closely watching economic indicators as higher volatility is expected in the Pound Sterling. This is because the UK Office for National Statistics (ONS) is set to release consumer and producer inflation data for March on Wednesday. If the data shows a decline in inflation as anticipated, it could fuel speculation that the Bank of England (BoE) might start lowering interest rates starting from the August meeting. This potential scenario could further impact the currency negatively.

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Monitoring

Stay updated on US and UK, BoE related updates and any shifts in the US Dollar’s strength by following PU Prime’s market insights and daily financial news.

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Disclaimer: Trading derivatives involves high risks, and market conditions can change rapidly. The content is for informational purposes only and should not be considered as financial advice. Traders should conduct their own research and consider risk management strategies.