British Pound pushes against five-week lows following mixed UK employment data

The British Pound (GBP) struggled on Tuesday to break above its recent five-week low against the US Dollar (USD), hovering near 1.3465 at the London session's opening. The Pound faced pressure due to mixed UK employment data, which did not bolster investor confidence. The UK's unemployment rate remained steady at 4.9% for the three months ending in July, falling short of the anticipated 5%.

However, jobless claims surged by 27.8K, significantly higher than the expected 8.3K increase. This sharp rise, combined with the previous month's 11.8K drop, painted a bleak picture of the UK labor market.

The Bank of England (BoE) meeting, scheduled for Thursday, remains the primary focus for traders. Many anticipate the central bank to keep interest rates unchanged, given the split committee opinions. The decision will be influenced by the upcoming UK Consumer Prices Index (CPI) figures, which are expected to reveal a stronger-than-expected inflation surge.

The Bank's Governor Bailey will not be available for press after the announcement, leaving investors to scrutinize the policy statement and the number of dissenting voices to gauge the likelihood of an interest rate hike before the year's end.

The UK Central Bank is also planning to revamp its bond-selling program, ceasing sales of 20- and 30-year yields to prevent further escalation in UK borrowing costs amid global market turbulence. In contrast to the Pound's weakness, the US Dollar strengthened, buoyed by the Federal Reserve's (Fed) upcoming monetary policy decisions.

The US retail sales data for August, released alongside the GBP/USD pair, is anticipated to show a 0.9% increase from the previous month, but this data is unlikely to sway the Dollar's trajectory, as market focus remains on the Fed's meeting. Expectations for at least two rate hikes by the end of the year have driven US bond yields to multi-year highs, further strengthening the Dollar.

Despite the Pound's struggles, other currency pairs fared less well on Tuesday. The Australian Dollar (AUD) remained under pressure, trading near its three-week low near 0.7150, as Chinese economic data failed to spur optimism. The US Dollar's upward march, driven by Fed rate-hike expectations and oil-linked inflation concerns, supported the USD/JPY pair, which pushed closer to 155.00.

Meanwhile, gold failed to capitalize on its modest price rise, settling just below $4,300 as investors took profits ahead of the Fed's two-day policy meeting.