GBP/USD Maintains Its Ascent above 1.2550 in Anticipation of UK Employment Data

The GBP/USD pair consolidates its gains during the early Asian session on Tuesday near 1.2560. In the midst of an overall improvement in the appetite for risk-related assets, the weakened US Dollar (USD) offers some support for the major pair. Until later on Tuesday, investors will closely monitor the UK employment market, the speech by the BoE's Pill, and US Producer Price Index (PPI) data.

As long as inflation remains elevated, a number of Federal Reserve (Fed) officials have emphasized the necessity of maintaining higher interest rates. On Monday, Fed vice chair Philip Jefferson joined other central bank officials in advocating for the maintenance of current interest rates until further indications of inflation alleviation emerge. Jefferson stated that he will further investigate the possibility that inflation will decline to the target level of 2%.

The likelihood of June rate cuts has decreased from 10% to nearly 5% on the financial markets, whereas the probability of September rate cuts has decreased from nearly 90% at the beginning of last week to 75%. The cautious stance adopted by Federal Reserve officials is expected to provide short-term support for the US dollar and restrict the pair's upside.  

However, there is an increasing amount of conjecture regarding whether the Bank of England (BoE) will initiate interest rate reductions in the summer. Traders have factored in a 25 basis point (bps) decrease in August and an overall reduction of 50 basis points (bps) in 2024. Andrew Bailey, governor of the Bank of England, stated at a press conference that he would await the publication of forthcoming data before determining whether to reduce interest rates. April employment data from the United Kingdom could provide insight into the state of the economy and future monetary policy decisions. A result that exceeds expectations could exert pressure on the Pound Sterling (GBP) and furnish the GBP/USD pair with a headwind.