Brown Brothers Harriman’s (BBH) Elias Haddad reports that GBP/USD is trading near 1.3500 following a mixed United Kingdom labor report, which showed falling unemployment but weaker payrolls [1]. The report highlights that wage pressures are easing, with private sector regular pay growth slowing to 3.2% year-over-year in February compared to 3.3% in January. This marks the lowest wage growth pace since October 2020 and is below the Bank of England’s (BoE) Q1 projection of 3.5% [1].
BBH expects that BoE rate hike pricing will revert to cuts, citing excess slack in the UK economy. The BoE estimates a negative output gap of -1% of GDP in 2026, suggesting room for renewed monetary easing later this year [1]. As a result, BBH forecasts GBP/USD will likely remain confined to a 1.3400–1.3700 range in the near term [1].
No specific market reactions or analyst opinions beyond BBH’s outlook are mentioned in the article. Forward-looking statements indicate that easing wage pressures and economic slack could prompt the BoE to shift from rate hikes to cuts, impacting GBP/USD trading dynamics [1].
CONCLUSION
The latest UK labor data and easing wage pressures have prompted BBH to anticipate a shift in BoE rate expectations from hikes to cuts. GBP/USD is expected to remain range-bound between 1.3400 and 1.3700 in the near term. Market participants should monitor BoE policy signals and economic data for further direction.