Despite UK employment data exceeding expectations across the board, the pound fell instead of rising – what secrets are hidden in tonight's decision?
2026-06-18 16:34:17
On Thursday (June 18) during the European session, the pound rebounded to around 1.3300 against the dollar, but it was still not far from the two-month low of 1.3260 reached on Wednesday, maintaining an overall defensive stance.
The UK Office for National Statistics released its latest labor market data on Thursday, showing that the UK unemployment rate unexpectedly fell to 4.9% in the three months to April, a slight decrease from the previous level of 5.0%, indicating that the job market's resilience exceeded market expectations. Net employment increased by 100,000 during the period, lower than the previous figure of 148,000, but higher than the market forecast of 80,000, reflecting continued support for domestic labor demand. Wage data remained strong, with the year-on-year growth rate of base average wages excluding bonuses remaining at 3.4%, higher than the market expectation of 3.2%; overall wage growth, including bonuses, remained stable at 4.4%, unchanged from the previous period.
Sustained strong wage income will boost household consumption, putting upward pressure on UK inflation and making it difficult for the central bank to quickly lower prices to the 2% target.
However, the positive employment data failed to strengthen the pound; the price only briefly surged before quickly retreating. The main reason was that market focus was on the Bank of England's interest rate decision later in the evening. Investors generally remained cautious, unwilling to establish large long positions in the pound before the decision was announced, resulting in a cautious trading sentiment.
Given the limited positive impact of the previous easing of US-Iran geopolitical tensions on the dollar, bullish funds have chosen to temporarily exit the market and wait for the central bank's policy statements to provide a clear direction before making directional investments.
The Bank of England is set to announce its latest interest rate decision on Thursday evening Beijing time. Market institutions and traders currently expect the central bank to maintain its benchmark interest rate at 3.75%, continuing its cautious monetary policy stance. The UK's May inflation data released on Wednesday showed stability, with no signs of a rebound in the price index, easing market concerns about inflation spiraling out of control and significantly reducing the need for the central bank to resume interest rate hikes.
At the same time, the US and Iran officially signed a peace memorandum of understanding, easing the geopolitical standoff in the Middle East. International crude oil prices fell significantly, and the risk of imported inflation caused by rising energy prices, which the market had been highly wary of, cooled down considerably. This further broadened the Bank of England's policy space to remain on hold and eliminates the need to suppress energy inflation by tightening monetary policy.
However, there are also differing opinions in the market. Currently, the UK's core inflation level is still higher than the policy target of 2%, domestic labor wage growth is resilient, and the pace of inflation decline is slow.
Therefore, this resolution is unlikely to signal an interest rate cut, and the central bank will retain the policy option of raising interest rates again later. Subsequently, the British pound and precious metal assets will also experience short-term fluctuations due to the hawkish/dovish wording of the resolution.
Meanwhile, the Federal Reserve held its first policy meeting chaired by new Chairman Warsh, which delivered a clear and hawkish tone throughout. The Fed chose to maintain the benchmark interest rate range at 3.50%-3.75%, in line with market expectations. However, the policy statement underwent a key adjustment, significantly streamlining the wording and removing all language implying easing or rate cuts, completely dispelling previous market hopes for further easing.
This updated dot plot is more indicative, with nearly half of policymakers predicting a possible rate hike this year and raising their year-end interest rate expectations. Impacted by hawkish signals, yields across all maturities of US Treasuries jumped rapidly, significantly increasing the attractiveness of US Treasuries and driving up the US dollar index, which in turn strengthened against major non-US currencies.
This external macroeconomic pressure directly impacts the GBP/USD exchange rate, becoming the core negative factor suppressing the pound's rebound against the dollar in the short term. Even with resilient UK employment data and market expectations that the Bank of England will maintain its interest rate, the valuation pressure from a stronger dollar still limits the pound's upside potential. Trading funds tend to avoid GBP/USD long positions in advance, awaiting further guidance from the Bank of England's decision later in the evening.
According to the daily chart, the GBP/USD pair is currently showing short-term weakness, with the price falling sharply below all short-term moving averages. The 20-day moving average (MA20) (1.3407) and 50-day moving average (MA50) are providing strong resistance, while the 100-day and 200-day moving averages are flattening and trending downwards, indicating a shift in the overall moving average system from a sideways to a bearish pattern. Key resistance is concentrated in the previous high range of 1.3407 and 1.3657; short-term support is at the recent low of 1.3261, with key medium-term support at 1.3159. A break below this level would open up further downside potential.
In terms of indicators, the MACD lines are running below the zero axis, the DIFF line continues to be close to the DEA line, and the green bars are increasing slightly, indicating that the bearish momentum has rebounded. The RSI value is 38.92, which is in the neutral to weak range and has not yet reached oversold levels, indicating that the downside potential has not yet been fully released.
In terms of price structure, after initially surging to 1.3657, the price weakened and fluctuated. This round of decline was driven by hawkish expectations from the Federal Reserve, resulting in a rapid drop and weak rebound. The price rebound failed to hold above the 20-day moving average, indicating insufficient buying support. If the price cannot recover 1.3407 in the short term, the downtrend will continue, and it will likely test the 1.3261 support level. If this level is broken, the price will likely fall to 1.3159. The overall technical pattern is bearish, and the Bank of England's decision tonight may exacerbate short-term volatility. Until a clear bottom reversal signal emerges, the strategy should focus on selling on rallies.
(GBP/USD daily chart, source: FX678)
At 15:58 Beijing time on June 18, the British pound was trading at 1.3296 against the US dollar.
UK employment data was strong, but the pound reacted modestly.
The UK Office for National Statistics released its latest labor market data on Thursday, showing that the UK unemployment rate unexpectedly fell to 4.9% in the three months to April, a slight decrease from the previous level of 5.0%, indicating that the job market's resilience exceeded market expectations. Net employment increased by 100,000 during the period, lower than the previous figure of 148,000, but higher than the market forecast of 80,000, reflecting continued support for domestic labor demand. Wage data remained strong, with the year-on-year growth rate of base average wages excluding bonuses remaining at 3.4%, higher than the market expectation of 3.2%; overall wage growth, including bonuses, remained stable at 4.4%, unchanged from the previous period.
Sustained strong wage income will boost household consumption, putting upward pressure on UK inflation and making it difficult for the central bank to quickly lower prices to the 2% target.
However, the positive employment data failed to strengthen the pound; the price only briefly surged before quickly retreating. The main reason was that market focus was on the Bank of England's interest rate decision later in the evening. Investors generally remained cautious, unwilling to establish large long positions in the pound before the decision was announced, resulting in a cautious trading sentiment.
Given the limited positive impact of the previous easing of US-Iran geopolitical tensions on the dollar, bullish funds have chosen to temporarily exit the market and wait for the central bank's policy statements to provide a clear direction before making directional investments.
The Bank of England is expected to hold rates steady, with easing geopolitical tensions providing policy space.
The Bank of England is set to announce its latest interest rate decision on Thursday evening Beijing time. Market institutions and traders currently expect the central bank to maintain its benchmark interest rate at 3.75%, continuing its cautious monetary policy stance. The UK's May inflation data released on Wednesday showed stability, with no signs of a rebound in the price index, easing market concerns about inflation spiraling out of control and significantly reducing the need for the central bank to resume interest rate hikes.
At the same time, the US and Iran officially signed a peace memorandum of understanding, easing the geopolitical standoff in the Middle East. International crude oil prices fell significantly, and the risk of imported inflation caused by rising energy prices, which the market had been highly wary of, cooled down considerably. This further broadened the Bank of England's policy space to remain on hold and eliminates the need to suppress energy inflation by tightening monetary policy.
However, there are also differing opinions in the market. Currently, the UK's core inflation level is still higher than the policy target of 2%, domestic labor wage growth is resilient, and the pace of inflation decline is slow.
Therefore, this resolution is unlikely to signal an interest rate cut, and the central bank will retain the policy option of raising interest rates again later. Subsequently, the British pound and precious metal assets will also experience short-term fluctuations due to the hawkish/dovish wording of the resolution.
The Fed's hawkish stance kept rates unchanged, and the strong dollar put downward pressure on the pound.
Meanwhile, the Federal Reserve held its first policy meeting chaired by new Chairman Warsh, which delivered a clear and hawkish tone throughout. The Fed chose to maintain the benchmark interest rate range at 3.50%-3.75%, in line with market expectations. However, the policy statement underwent a key adjustment, significantly streamlining the wording and removing all language implying easing or rate cuts, completely dispelling previous market hopes for further easing.
This updated dot plot is more indicative, with nearly half of policymakers predicting a possible rate hike this year and raising their year-end interest rate expectations. Impacted by hawkish signals, yields across all maturities of US Treasuries jumped rapidly, significantly increasing the attractiveness of US Treasuries and driving up the US dollar index, which in turn strengthened against major non-US currencies.
This external macroeconomic pressure directly impacts the GBP/USD exchange rate, becoming the core negative factor suppressing the pound's rebound against the dollar in the short term. Even with resilient UK employment data and market expectations that the Bank of England will maintain its interest rate, the valuation pressure from a stronger dollar still limits the pound's upside potential. Trading funds tend to avoid GBP/USD long positions in advance, awaiting further guidance from the Bank of England's decision later in the evening.
Technical Analysis
According to the daily chart, the GBP/USD pair is currently showing short-term weakness, with the price falling sharply below all short-term moving averages. The 20-day moving average (MA20) (1.3407) and 50-day moving average (MA50) are providing strong resistance, while the 100-day and 200-day moving averages are flattening and trending downwards, indicating a shift in the overall moving average system from a sideways to a bearish pattern. Key resistance is concentrated in the previous high range of 1.3407 and 1.3657; short-term support is at the recent low of 1.3261, with key medium-term support at 1.3159. A break below this level would open up further downside potential.
In terms of indicators, the MACD lines are running below the zero axis, the DIFF line continues to be close to the DEA line, and the green bars are increasing slightly, indicating that the bearish momentum has rebounded. The RSI value is 38.92, which is in the neutral to weak range and has not yet reached oversold levels, indicating that the downside potential has not yet been fully released.
In terms of price structure, after initially surging to 1.3657, the price weakened and fluctuated. This round of decline was driven by hawkish expectations from the Federal Reserve, resulting in a rapid drop and weak rebound. The price rebound failed to hold above the 20-day moving average, indicating insufficient buying support. If the price cannot recover 1.3407 in the short term, the downtrend will continue, and it will likely test the 1.3261 support level. If this level is broken, the price will likely fall to 1.3159. The overall technical pattern is bearish, and the Bank of England's decision tonight may exacerbate short-term volatility. Until a clear bottom reversal signal emerges, the strategy should focus on selling on rallies.
(GBP/USD daily chart, source: FX678)
At 15:58 Beijing time on June 18, the British pound was trading at 1.3296 against the US dollar.
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