British Pound Forecast: GBP/USD Breaks Down after UK Jobs and New Chancellor

GBP/USD Key Points

• The UK jobs report was mixed, with unemployment falling but wages coming in lower than expected.
• Traders are skeptical about the new UK government, but aren’t panicking yet.
• The Pound is the weakest major currency on the day, with GBP/USD falling -50 pips on the day to break below a 1-month bullish trendline.

Outside of earnings reports from Alphabet and Tesla after the bell tomorrow, most of the major market-moving economic data will come from the European continent this week. Today’s focus is on the situation in the UK.

During this morning’s European session, the UK jobs report pointed to a labor market that is stabilizing, albeit at a relatively weak level. Unemployment slipped to 4.9% in the three months through May, while the employment rate edged up to 75.1%. In terms of raw numbers, new unemployment claimants fell to 6.7K, well below expectations of 29K, while average earnings rose 4.3% 3mo/y, below the 4.5% that economists had anticipated. Overall, easing wage pressure and weak hiring should reassure the Bank of England that domestic inflation is cooling, although conflicting employment surveys and recent data-quality problems argue against placing too much weight on this report in isolation.

New Chancellor and Energy VAT

In one of new Prime Minister Andy Burnham’s first moves, John Healey was appointed Chancellor of the Exchequer yesterday. Healey has previous junior Treasury experience, but his recent political profile was built at the Ministry of Defence, where he criticized the Treasury for constraining government ambitions and pushed for defense spending to reach 3% of GDP by 2030.

His first comments in the new role emphasized that fiscal control and market credibility remain central, a key note to hit in an economy plagued by high debt, elevated borrowing costs and little room for significant unfunded spending.

The government’s first cost-of-living measure will temporarily cut VAT on household electricity from 5% to zero for six months beginning October 1, reducing the typical annualized bill by around £45 and costing approximately £850 million in 2026–27. Ministers say the measure will be funded by cancelling the previous government’s planned £1.8 billion digital ID program, although the IFS notes that the program’s funding had never been fully identified, weakening the claim that its cancellation creates a straightforward cash saving. For the broader economy, the policy should mechanically lower headline inflation and provide some household relief, but it is modest in scale.

Moving forward, traders will key in on any policy pronouncements from the new government, with the highly-anticipated November budget already looming in the back of some traders’ minds.

British Pound Technical Analysis: GBP/USD 4-Hour Chart

Source: Tradingview, StoneX

Markets are already expressing a dollop of skepticism toward the new government, with the yield on the benchmark 10yr Gilt rising 6bps since the announcement to cross back above the psychologically significant 5% level. Meanwhile, pound sterling is the weakest major currency on the day, falling more than 50 pips against the greenback as of writing and breaking below a 1-month bullish trendline. Moving forward, the pair is likely to remain under pressure, with near-term support at last week’s low near 1.3350 and then the 1.3300 level. Only a recovery back above 1.3450 would erase the near-term bearish bias.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX