GBP/USD slides below 1.2500 on downbeat UK employment data, focus on US Retail Sales, debt ceiling talks

• GBP/USD takes offers to refresh intraday low, reverses week-start rebound from a fortnight low.
• UK Claimant Count Change rise for April, ILO Unemployment Rate also increase for three months to March.
• BoE’s Pill highlights inflation woes to defend hawkish monetary policy.
• US Retail Sales for April, policymakers’ efforts to avoid debt payment default will be the key to follow for fresh impulse.

GBP/USD refreshes intrday low near 1.2490 as it bears the burden of mostly downbeat UK employment numbers heading into Tuesday’s London open.

UK Claimant Count Change jumped by 46.7K in April versus -10.8K expected and 26.5K prior while ILO Unemployment Rate for three months to March rose to 3.9% against expectations of witnessing no change figure of 3.8%. Further, the Average Earnings excluding bonus and including for three months to March came in unimpressive despite crossing the forecasts.

The latest figures, however, justifies Monday’s hawkish comments from Bank of England (BoE) Chief Economist Huw Pill. “The Bank of England needs to guard against second-round inflationary effects which could see inflation bottom out at 4% or 5%, rather than return to its 2% target,” said BoE per Reuters.

Even if the downbeat UK data weigh on the Pound Sterling price, the sluggish US Dollar puts a floor under the GBP/USD price. That said, the US Dollar Index (DXY) keeps the week-start pullback from the monthly high despite bouncing off intraday low to 102.45 by the press time.

That said, the greenback’s latest weakness could be linked to Monday’s NY Empire State Manufacturing Index which marked the biggest fall since April 2020, to -31.8 for May. The same joins the downbeat signals from the US inflation numbers flashed the last week, as well as justifying the Federal Reserve’s (Fed) dovish hike. Recently, the odds of witnessing no rate hike from the Fed in 2023 are popular.

On a different page, mixed views surrounding the US policymakers’ readiness to avoid the debt ceiling expiration, global markets turn cautious as President Joe Biden and House Speaker Kevin McCarthy brace for the key negotiations scheduled at 19:00 GMT. That said, the latest comments from US House Speaker McCarthy saying, “I don’t think we’re in a good place,” seem to put a floor under the US Dollar price, via fears of deadlock on the US debt ceiling extension as Republicans may stick to their demand.

Having witnessed initial market reaction to the UK job numbers, the GBP/USD pair may witness lackluster moves amid anxiety ahead of the US Retail Sales for April, expected at 0.7% MoM versus -0.6% prior. Following that, the talks between US President Biden and House Speaker McCarthy to avoid debt expiration will be crucial to watch as the deadline of US default looms, recently brought forward to the first week of June.

Should the US data trace the latest trend of being downbeat, as well as the US policymakers manage to either solve the default riddle or unveils guide to extend the debt ceiling, the GBP/USD may recover.

Technical analysis

GBP/USD remains indecisive while staying between a one-month-old ascending trend line and the mid-April peak, respectively near 1.2450 and 1.2550.