British Pound declines below 1.3550 on soft UK labour figures, traders brace for CPI data

The British Pound (GBP) slipped below the 1.3550 mark on Wednesday as labour figures from the UK showed disappointment. Traders are now anticipating the release of the UK Consumer Price Index (CPI) inflation data later in the day. According to the Office for National Statistics, the UK's Unemployment Rate remained steady at 4.9% for the quarter ending in June, surpassing the market's expectation of 4.8%.

Furthermore, Average Earnings Including Bonus decreased to 4.1% in the same period, down from 4.4% in May. Some analysts believe this wage slowdown might discourage the Bank of England (BoE) from raising interest rates this year, with only one rate hike projected for the year, increasing the Bank rate from 3.75% to 4.0%. James Smith, an economist at ING, commented on the persistent weakness in private sector hiring and wage growth, suggesting that the path towards a rate hike in 2026 remains challenging, barring a significant and prolonged rise in energy prices.

However, expectations of a US interest rate hike next month could weaken the US Dollar (USD), limiting the downside risk for the GBP/USD pair. Recent data revealed a drop in US Retail Sales in July, marking the first decline in nine months, alongside unexpected job losses and relatively stable CPI inflation figures. The Fed Watch tool anticipates a 35% probability of a rate hike at the Federal Reserve's September meeting, down from 47% the previous month.

In the daily chart, GBP/USD exhibits a bullish near-term outlook, staying above the 100-day simple moving average (SMA) and the Bollinger Bands' 20-period middle SMA, which supports the ongoing uptrend. The Relative Strength Index (14) stands at 60.8, indicating constructive momentum that may allow for additional gains while the price remains above these key averages.

The immediate resistance level for GBP/USD is the upper Bollinger Band at 1.3615, where buying interest may weaken. Conversely, the initial support level is provided by the Bollinger middle band at 1.3450, followed by the 100-day SMA at 1.3420 and a deeper support at the lower Bollinger band near 1.3285. As long as GBP/USD maintains this cluster of support, technical analysis suggests a favorable environment for buying during pullbacks rather than anticipating a broader reversal.