The British pound sterling is recovering, wage growth in the United Kingdom accentuates uncertainty about the Bank of England’s interest rate cut

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Sterling pounds (GBP) are discovering strong buying interest near the psychological support of 1.2500 against the US Dollar in Tuesday’s US session. The GBP/USD pair rebounds as the impact of weak UK employment data for the three months ending in March is offset by stable wage growth. Additionally, the decline in the US Dollar despite the rise in the US Producer Price Index (PPI) has boosted demand for the Pound.

The UK’s Office for National Statistics (ONS) has reported that the labor market has witnessed a reduction for the third consecutive time, while wage growth momentum remains stable at relatively high levels.

Following the release of labor market data, BoE Chief Economist Huw Pill commented: “Wage growth rates remain well above what would be consistent with sustainably meeting the 2% inflation target.” He emphasized maintaining a restrictive stance in monetary policy, which continues to exert downward pressure on domestic inflation persistence. Regarding interest rate cuts, he opined that it is reasonable to believe that by summer there will be enough confidence to consider a rate cut.

On the other hand, the Pound finds strong buying interest near 1.2500 against the US Dollar. The GBP/USD pair advances despite British employers laying off 177,000 workers, a figure higher than the dismissal of 156,000 employees in the December-February period.

In the current scenario, the situation seems favorable for the BoE to begin reducing interest rates, as pressures on prices are also steadily easing. However, strong wage growth fueling service inflation will remain one of the main concerns for BoE policymakers.

Technical Analysis: The Sterling Pound remains above the 20-day EMA

The Sterling Pound shows strength near 1.2560 due to good short-term prospects. The GBP/USD pair remains comfortably above the 20-day Exponential Moving Average (EMA), which trades around 1.2530. The pair has retraced 38.2% of the losses recorded from a 10-month high around 1.2900.

The Cable remains under pressure near the neckline of the head and shoulders (H&S) chart pattern formed on a daily timeframe. On April 12, the pair sharply declined after breaking below the neckline of the head and shoulders pattern drawn from the December 8 low around 1.2500.

The 14-period RSI oscillates in the range of 40.00-60.00, suggesting indecision among market participants.