GBP/USD Slides as UK Unemployment Hits Decade High

The British Pound tumbled nearly 100 pips, falling 0.71% to 1.3529, as UK unemployment rose to 5.2%, the highest level in a decade outside of the pandemic period. Traders returned from the US holiday to a weaker-than-expected jobs report, sparking renewed bets on a Bank of England rate cut in March.


Wage Growth Cooling Adds Pressure

Average earnings, excluding bonuses, also slowed from 4.4% to 4.2%, signaling softer wage growth. The combination of rising unemployment and cooling wages increased expectations that the Bank of England may reduce interest rates later this month to support the economy.


Inflation Data in Focus

Investors are now closely watching UK inflation numbers due this week. Consumer price inflation is expected to ease from 3.4% in December to around 3%, which could reinforce expectations of further monetary easing.
US Market Activity Provides Contrast

While UK data pressures the Pound, US economic indicators show modest strength. Manufacturing activity in New York rose slightly, and employment growth remains positive, adding support to the US Dollar against most major currencies.


Rate Differentials Favor the Dollar

The widening gap between UK and US interest rate expectations makes the US Dollar relatively more attractive. Markets are pricing in nearly half a percent of UK rate easing over the year, further pressuring GBP/USD.


Market Heat Map Highlights
This week, the British Pound has shown mixed performance against major currencies. It has remained relatively strong versus the Swiss Franc while weakening against the US Dollar, reflecting the impact of the UK labor market data and anticipated monetary policy moves.