- GBP/USD trades with a mild bearish bias around 1.2730 amid the softer US dollar on Tuesday.
- Investors will closely monitor the UK employment for fresh impetus, which is expected to remain contracted in May.
- The stronger US employment data last week has triggered the odds that Fed will delay its rate cuts this year.
The GBP/USD pair trades with mild losses near 1.2730 during the early Asian session on Tuesday. Traders might prefer to wait on the sidelines ahead of the release of the UK employment report, which is due later in the day. In the meantime, the lower bets of the US Federal Reserve's (Fed) rate cuts this year are likely to boost the US Dollar and cap the upside for the pair.
The employment growth in the UK has been contracting last few months and it is likely to continue in May, making it easier for the Bank of England (BoE) to start lowering the borrowing costs. However, Average Earnings, a measure of wage growth, remains high and it might convince the central bank to delay its easing cycle this year. Any signs of stronger employment market data could underpin the Pound Sterling (GBP) in the near term.
The employment data in the United States last week has spurred speculation that the Fed will keep rates higher for longer. This stronger data has provided some support to the Greenback in the previous sessions. Futures traders are now pricing in nearly 47% odds of a rate cut for the September meeting, down from 68% before the NFP data, according to the CME FedWatch tool.
The US Consumer Price Index (CPI) inflation data on Wednesday will be crucial as the Fed officials have emphasized in recent weeks that they will wait for more evidence of inflation data before cutting the interest rate. The US headline CPI figure is expected to show an increase of 3.4% YoY in May, while the core CPI is estimated to rise 3.5% YoY in the same report period. The Fed will announce its interest rate decision and update the Summary of Economic Projections (SEP) after the release of CPI reports. The hawkish tone from the Fed might lift the USD and create a headwind for GBP/USD.
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