Today's data showed that Unemployment in the UK inched down to 3.8% in the February-April period, from 3.9% previously. More to it, average weekly earnings rose to 6.5%, in the biggest increase of the year. Excluding bonuses, wages surged 7.2%, in the "largest growth rate seen outside of the coronavirus (COVID-19) pandemic". 
These very strong data and especially the new increase in total and regular pay, which have been a source of concern for the central bank, do not help its effort to bring down inflation. It also creates risk for a wage-price spiral and Governor bailey had essentially hinted to such fears recently, when he spoke of second-round effects that are "unlikely" to go away quickly. 
The Consumer Price Index (CPI) had decelerated sharply to 8.7% y/y in April, but the report was concerning, since the Core reading jumped to 6.8 y/y in the biggest rise since 1992. With a tight labor market, elevated wages and inflation far from the 2% target, the bank of England has more work to do on the rate hike front. Earlier this month it had raised them to 4.5% and kept more tightening in play.
GBP/USD is upbeat today, as the strong employment report keeps pressure on the BoE for more monetary firming. The US Fed meanwhile has to decide whether to hike or pause on Wednesday, with markets expecting rates to stay at 5.25%. However, the US CPI inflation update is due later today, which has the potential to strengthen or reverse that pricing, depending on the outcome.
The pair comes from two straight profitable weeks after having defended the 38.2% Fibonacci of the March low/May high. Along with the fact that it trades above the EMA200 and the daily Ichimokou Cloud, GBP/USD has the chance to push for fresh 2023 highs (1.2680), but 1.2948 has a higher degree of difficulty.
On the other hand, the British Pound is having a negative month and there is risk for a return below the EMA200 (1.2450-60), although a catalyst will be required for breach of 1.2270. In any case, the next leg of the move will likely be determined by the US inflation report and the Fed decision.
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.