British Pound Shows Little Movement Amid Job Growth Concerns

February 17, 2025

The British pound is experiencing minor fluctuations in early trading on Monday. As of the North American session, the GBP/USD exchange rate stands at 1.2592, reflecting a slight increase of 0.06% for the day. However, concerns are mounting regarding the future of employment in the United Kingdom, which poses risks to the currency and economic stability.

Job Growth Forecasts Cause Alarm

The financial markets are reacting to forecasts indicating a dramatic decline in job growth for the last quarter of 2024. Economists predict a loss of approximately 130,000 jobs in the three months leading up to December, a significant downturn compared to the previously reported growth of 36,000 jobs during the three-month period ending in November. This marked the end of eight consecutive quarters of job growth, and if realized, it could exert renewed pressure on the Bank of England (BoE) regarding interest rate policies.

Current projections suggest that the unemployment rate may climb to 4.5% from the current 4.4%. Conversely, wage growth, which includes bonuses, is expected to rise to 5.9%, up from a previous figure of 5.6%. This increase in wages may contribute to inflationary pressures, complicating the economic landscape further.

Bank of England’s Position

With the next meeting of the Bank of England scheduled for March 20, the potential for immediate rate cuts seems limited following an earlier reduction in interest rates earlier this month. In a recent statement, Governor Andrew Bailey expressed caution regarding the economic outlook, describing the UK economy as ‘quite static.’ This sentiment follows the fourth quarter’s modest gross domestic product (GDP) growth of 0.1%, which, while better than the BoE’s prediction of a contraction, still presents challenges in the context of persistent inflation.

The Bank of England remains alarmed by inflation levels that refuse to diminish despite wage increases. Additionally, global political instability continues to weigh on economic forecasts, making financial experts cautious about the UK’s path forward.

U.S. Retail Sales Decline

On the other side of the Atlantic, data from the United States has shown disappointing retail sales figures. For January, retail sales fell by 0.9%, a stark contrast to the market’s expectation of a slight decrease of 0.1% and a reversal from a solid gain of 0.7% in December. This decline, the most severe since March 2023, has been attributed to adverse weather conditions and the impact of fires in Los Angeles, both of which have curtailed consumer spending. Annually, retail sales growth moderated to 4.2%, down from an upwardly revised 4.4% for December, yet exceeding forecasts of 3.7%.

Technical Analysis of GBP/USD

In terms of technical analysis, GBP/USD tested a crucial support level at 1.2585 earlier in the day. If this level is breached, the next support point can be found at 1.2539. Meanwhile, resistance levels are identified at 1.2630 and 1.2676, which traders will monitor closely as market conditions evolve.

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Author Bio: Kenny Fisher is a seasoned financial market analyst specialized in macroeconomic trends. His insights span forex, equities, and commodities, and his written work has informed investors through reputable financial publications since 2012.