The British Pound came under pressure from UK employment data which complicates the Bank of England’s future rate decisions. The Bank of England would ideally like to see less upward pressure on inflation while the employment sector remains steady. As the UK’s employment data failed to accomplish this, the GBP Index fell 0.50%.

UK Employment Data

The UK Average Earnings Index rose from 4.7% to 5.00% which tends to have a positive impact on the currency. However, salary growth is also known to apply upward pressure on inflation, a key concern for the Bank of England. Currently, analysts predict the UK to have the highest inflation within the G7 Group.

UK inflation has risen to 3.8% and remained there for 2 consecutive months. With the UK inflation rate at a 21-month high, higher salaries can make it difficult for inflation to fall to the bank’s 2% target. As this can prompt the BoE to have a more hawkish approach the development can support the GBP. However, due to the UK’s risk of economic contraction, the development remains negative.

In addition to this, the UK’s Unemployment Claimant Claims rose by 25,800 claims. The figure is 15,500 higher than previous expectations and is the highest seen since June. In August, the UK Unemployment Rate rose to 4.80% from 4.00% the year before. The rise in the Unemployment Rate also pressures the Pound.

Bank of England

Investors are watching comments from regulator Megan Green closely. She joined most of the Bank of England’s Monetary Policy Committee in keeping rates at 4.00% in September and opposed August’s narrow 25-basis-point cut. Her latest remarks suggest borrowing costs could rise at the next meeting.

The Bank of England is likely to cut interest rates, similar to the rest of the world, however, less frequently. According to experts the Bank of England is likely to cut either 25 or 50 basis points over the next 6 months. This is particularly less dovish than the Federal Reserve which is likely to cut between 75-100 basis points. The Bank of England hawkishness is a positive note for the GBP, but only if the economy and UK budget can maintain investor confidence.

The next UK budget is due at the end of November 2025. For this reason, the end of October and into November is likely to be a volatile period for the Pound.

GBP - Technical Analysis

This week, the British Pound has been the worst performing currency after the Australian and New Zealand Dollar. The best-performing currencies have been the US dollar and the Japanese yen, with the latter recovering from earlier losses.

When analyzing the Pound against the US Dollar the exchange rate is forming clear lower highs and lows. Due to this, the GBPUSD is showing a direct downward trend and is trading at the lowest price since August 1st.

The GBPUSD is trading clearly below the 75 and 100 bar exponential moving averages as well as below the 50.00 on the RSI. This is providing a clear indication of a bearish momentum. However, the price has not established itself below the support level and previous swing low at 1.32500. For this reason, traders will be key for bearish momentum to regain strength and attempt a further breakout.

Key Takeaways:

• The British Pound fell 0.50% after UK employment data showed slower job growth and rising unemployment. This development complicates the Bank of England’s rate path.
• Average earnings rose from 4.7% to 5.0%, supporting household income but reinforcing inflationary pressure.
• Despite global easing trends, the BoE is expected to cut rates by only 25-50 basis points in the next six months. This maintains a relatively hawkish stance compared with the Fed’s projected 75-100 basis-point cuts.
• Technically, GBPUSD remains in a downtrend, forming lower highs and lows and trading below key moving averages and RSI 50. A break below the 1.3250 support could confirm further downside.