Insights 
VT 
The GBP/USD pair climbed to around 1.3195 during the early European session, supported by developments in the US-UK trade agreement. President Trump announced a new 10% tariff on most British goods but agreed to reduce tariffs on British cars, steel, and aluminium.
However, GBP/USD fell by over one percent on Monday, dropping below 1.3200, due to a recovery in US Dollar demand. The recent trade talks between the US and China, resulting in a temporary suspension of high tariffs for 90 days, allowed market participants some time to assess the impact before further tariff impositions.
Uk Employment Data
UK employment data released on Tuesday showed a rise in the Claimant Count Change to 22.3K. The ILO Unemployment Rate also increased to 4.5% for the three months ending in March, with Average Hourly Earnings slightly declining.
Anticipation builds for the US Consumer Price Index (CPI) release, with expectations of a 2.4% annual rise in inflation for April. The core CPI inflation is projected to remain stable at 2.8% year-over-year. The outcome of both the UK employment report and US CPI data will be influential for the GBP/USD trajectory.
As the pound initially nudged higher, moving towards 1.3195 in early European trade, markets were reacting to a flicker of optimism surrounding transatlantic negotiations. A shift in the tariff stance from Washington helped buoy sentiment, with cuts in customs duties on British automotive and metal exports offering some relief. The 10% duty announced on other UK goods, however, quickly tempered that optimism, leaving sterling vulnerable to any shifts in market mood.
This fragility became clearer as sterling slipped back beneath the 1.3200 mark, giving up more than one percent. Behind this pullback was not just the stated trade news, but also a broader recovery in dollar appetite. Some of that renewed interest appeared to follow the temporary trade truce between the US and China. A 90-day window without further tariff escalation gave investors breathing room, allowing the greenback to attract flows again as a relative safe harbour.
Domestic Economic Concerns
From the domestic side, economic data released out of Britain painted a sketch that left little comfort. The rise in the Claimant Count Change to 22,300 suggests the job market is softening more than expected. Unemployment reaching 4.5%, from an earlier 4.2%, extended that picture. What likely caught attention more quietly was the small fall in wage growth. Average Hourly Earnings, though still positive, have begun to level off. This mix of higher jobless figures and slower pay raises hints at falling momentum in demand, which can have a dampening effect on rate expectations.
With these elements in mind, the focus began shifting to the upcoming US inflation print. Expectations for headline CPI to come in at 2.4% year-on-year could reinforce the dollar’s footing if met or exceeded. Core inflation, projected to hold at 2.8%, will also weigh heavily on how aggressive policy tightening may remain. Anything pointing to firmer underlying price pressures would support a stronger dollar bias.
In preparing for what lies ahead, we look towards US inflation as a pivotal marker. Markets responding to CPI data tend to move sharply if numbers surprise in either direction. Pair that with already waning UK labour data, and the current tone grows more vulnerable. A firmer inflation read stateside could prompt traders to price a more material policy divergence between the Bank of England and the Fed.
Traders may be more selective in options exposure, with implied volatility likely to widen around the economic releases. There may be reduced interest in longer-dated GBP calls if wage pressures continue to slide. Meanwhile, near-term strategies may reflect expectations of continued downward pressure, especially against the greenback if data aligns in its favour. Close attention must also be paid to positioning data and futures rollover patterns in case of skewed sentiment developing beneath current pricing.
As ever, staying data-dependent remains the clearest course here. Moves in interest rate expectations on either side of the Atlantic continue to drive the bulk of direction. With inflation data next in focus and employment slipping slightly in the UK, risk-reward is clearly leaning towards currency movement being dictated more by US outcomes than UK resilience for now.
