GBP/USD Slips Below 1.3400 as Markets Await UK Labor Market Data

GBP/USD Slips Below 1.3400 as Markets Await UK Labor Market Data

The British Pound (GBP) weakened against the US Dollar (USD) on Thursday, with the GBP/USD pair falling to around 1.3390 during the Asian session. The drop comes ahead of the release of the United Kingdom’s labor data, including June’s Claimant Count Change and the ILO Unemployment Rate for the three months to May.

Stronger US Dollar Pressures GBP/USD

The US Dollar continued to gain strength on the back of increasing expectations that the Federal Reserve (Fed) will hold interest rates steady at 4.25%–4.50% during its July policy meeting. This sentiment was reinforced by Fed officials suggesting that monetary policy is currently in the right place due to inflation concerns and trade-related uncertainty.

• Dallas Fed President Lorie Logan said interest rates may need to stay unchanged longer to keep inflation in check.
• New York Fed President John Williams echoed a similar stance, supporting a cautious approach.

Additionally, US PPI data for June came in flat, missing expectations of a 0.2% increase, with core PPI rising only 2.6% YoY versus 3.0% prior, further signaling easing inflation.

UK Inflation Holds Firm – Can It Support the Pound?

On the UK front, recent hotter-than-expected inflation data has kept hopes alive for the Bank of England (BoE) to maintain its restrictive monetary policy stance. However, any further rate hikes may be limited by softening labor market conditions. The upcoming UK jobs report will be crucial in shaping the BoE’s tone ahead of its August monetary policy meeting.

Data to Watch Later Today

Markets will be watching several US economic indicators later today, including:

• US Retail Sales (June)
• Initial Jobless Claims
• Philly Fed Manufacturing Index

These numbers could further support the USD or trigger corrections in case of weaker-than-expected prints.

GBP/USD Outlook

While the downside in GBP/USD is supported by a stronger dollar and cautious Fed outlook, sticky UK inflation and expectations of a hawkish BoE could help limit further losses. A break below 1.3350 could signal deeper declines, while recovery toward 1.3450 would require strong UK labor data or weaker US indicators.

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