Today’s labour market report for the UK – released by the Office forNational Statistics (ONS) – has the Bank of England (BoE) caught between a rockand a hard place. Wage pressures remain elevated and job figures appear to bestarting to feel the impact of US President Donald Trump’stariff plans, as well as the UK government’s economic policies.

According to the ONS report, the unemployment rate held steady at 4.4% inthe three months to February, in line with market expectations. This is thefourth consecutive month that the rate has remained at this level, afterrecording a rise in October 2024.

Job vacancies in March fell to pre-pandemic levels for the first time in thelast four years. Unemployment figures are closely monitored by the BoE’spolicymakers as they reflect the state of the country’s economy.

Economists noted that UK businesses let go of 78,467 workers in March justahead of the government’s latest budget measures taking effect this month. Oneof the measures closely associated with the jobs market is the increase ofNational Insurance Contributions (NIC) for employers, which is expected to pushbusinesses’ salary costs higher.

ONS data also revealed average earnings including bonuses increased by 5.6%,matching January’s revised figure, but was slightly less than the 5.7% expectedby market analysts. Average earningsgrowth excluding bonuses landed at 5.9%, 0.1% higher compared to January’srevised reading, but again below economists’ forecasts (6.0%). It should benoted that both figures outpaced the UK’s Consumer Price Index (CPI) inflationrate which stood at 2.8% in February.

Sterling strengthens against US Dollar

The British pound (GBP) strengthened against the US dollar (USD) and the euro (EUR), trading at US$1.31and €1.16, respectively. Sterling is on track to print a sixth consecutive dayin the green against the US dollar, recording its longest winning streak in thelast nine months.

The GBP/USD is poised forfurther outperformance. Up 5.5% this year so far, priceaction on the monthly timeframe exhibits space to continue pressing northuntil highs of US$1.3434 – located just beneath resistance coming in atUS$1.3483. Additional buying beyond said resistances shines the technicalspotlight on another layer of resistance from US$1.4263. Meanwhile, on thedaily timeframe, a breach of resistance around the US$1.3112 neighbourhood,serves as another bullish indicator towards at least US$1.3268.

UK March CPI report in focus

Some economists suggest that the BoE’s Monetary Policy Committee (MPC) couldchange its interest rate strategy, accelerating the rate cut pace this year tosupport the UK’s struggling economy, which may feel the additional pressurefrom Trump’s tariffs. Nevertheless, wage pressure and the danger of CPIinflation rising sharply could make the MPC’s members rethink their nextsteps.

Tomorrow, the ONS will publish the CPI inflation for March, with market analysts expecting a slightdrop to 2.7% on a yearly basis, down from 2.8%.

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Written by the FP Markets Research Team