GBP/USD, EUR/USD Forecast: Two trades to watch

GBP/USD falls as wage growth eases and the labour market loosens

• Total wage growth eased to 5.8% from 5.9%
• Unemployment rose to 4.4% from 4.3%
• GBP/USD falls towards 1.27

The pound is inching lower after UK jobs data showed that pay growth continued to cool in April despite a 10% increase in the national living wage.

Wage growth cooled to 5.8% in the three months to April, down from 5.9% in March, putting it on the right trajectory and supporting falling price pressures.

Meanwhile, the unemployment rate unexpectedly ticked higher to 4.4%, showing that labour market conditions continued to loosen.

Hotter-than-expected service sector inflation meant that a June interest rate cut was off the table. However, pay growth is slowing in line with the Bank of England's expectations, and labor market conditions are easing. Today's data appears to be in line with the MPC cutting rates later this summer.

Meanwhile, the USD is holding steady as investors look ahead to US inflation data and the FOMC interest rate decision tomorrow.

GBP/USD forecast – technical analysis

GBP/USD found support once again in the 1.2680 region, also the lower band of the rising channel. The long lower wick on the candle suggests little selling demand at the lower price.

Sellers will need to take out the 1.27 -1.2680 zone, to extend losses towards 1.2640 the 100 SMA.

Any recovery would need to retake 1.28, ahead of 1.2890, the 2024 high.

EUR/USD steadies as the dust settles after the weekend elections

• EUR steadies after political uncertainty worries settle
• ECB chief economist Philip Lane to speak
• EUR/USD holds above 1.0750

The euro has stabilised today after yesterday's sell-off following a surprise snap election called by French President Macron.

Macron’s announcement of a snap election in France came after his party's disappointing performance in the European parliamentary elections. Political uncertainty could prevent the ECB from further rate cuts this year if the central bank opts to pause further cuts to assess how a change to a right-wing governing party could impact the economy.

Attention will now turn to ECB chief economist Philip Lane, who is due to speak later and could provide further clarity over the future path for interest rates and inflation.

His comments come after the ECB cut interest rates last week for the first time in five years but also upwardly revised its inflation forecast.

Separately, the US dollar is holding on to recent gains as the US dollar index trades around a monthly high. The US dollar pushed northwards after stronger-than-expected US nonfarm payrolls, which saw the market push back on Federal Reserve rate cut expectations.

Attention is now on tomorrow's inflation figures and the FOMC rate decision. The Fed is not expected to cut rates but could provide more clues about whether it's still considering a rate cut this year. The market is now pricing in less than 50% probability of a September cut, down from 70% prior to Friday's nonfarm payroll report.

EUR/USD forecast – technical analysis

After running into resistance at 1.0915, EUR/USD recorrected lower, breaking below the 100 SMA and the 200 SMA before finding support on the falling trendline dating back to the start of the year.

Sellers supported by the RSI below 50 will look to take out the falling trendline support at 1.0750 and yesterday’s low at 1.0730. Below here, 1.0700 comes into play.

Any recovery must retake the 200 SMA at 1.0790 and the 100 SMA at 1.08 to bring the rising trendline resistance at 1.0840 into focus. Above here, attention turns to 1.0915, the June high.