GBP/USD, DAX Forecast: Two trades to watch

GBP/USD at a monthly low after UK jobs data & ahead of US CPI

• UK unemployment rose to 4.5% & wage growth eased
• US CPI is expected to hold at 2.4%
• GBP/USD has fallen away from its 2025 high

GBP/USD hovers around a monthly low as investors weigh up U.S. trade policies along with fresh economic data.

Yesterday, the US and China announced a 90-day reduction in tariffs, which brought optimism to the market about a de-escalation in the trade war. This boosted the US dollar and risk sentiment.

The USD has held onto most of those gains. However, there is also an element of caution as tariffs will still remain above where they were at the beginning of Trump's presidency, which could slow economic growth and add inflationary pressures to the US.

US inflation data is due later today and is expected to show that CPI remained at 2.4% in April while rising 0.3% month over month after a 0.1% decline in March. Hotter-than-expected inflation could lift the US dollar.

The Fed left rates unchanged last week and has indicated it is in no rush to cut rates further.

Meanwhile, the pound was little moved by UK jobs data, which showed that UK unemployment rose to the highest level since 2021 at 4.5%, up from 4.4%. The broader picture is that the labour market is cooling, with the number of employees on payroll falling in the first quarter and the number of job vacancies also falling. However, UK wage growth was 5.5%, including bonuses, which was down from 5.7% but ahead of the 5.2% expected.

Strong wage growth is intrinsically linked to sticky service sector inflation. Bank of England policymakers have persistently cited strong wage growth as a reason to be cautious about cutting rates aggressively.

GBP/USD forecast – technical analysis

GBP/USD's recovery from 1.21 is starting to look overstretched. The price has eased back from the 2025 high of 1.3445 to current levels of 1.3250. While we’ve seen the move lower, there is no concrete evidence of a trend reversal yet.

Sellers would need to extend the selloff to 1.31, the round number, to open the door to 1.30, the psychological level.

Buyers would ned to rise above resistance in the 1.32 – 1.3250 area to create a bullish outlook and bring 1.33 into the picture.

DAX hovers around its record high ahead of ZEW sentiment data

• Trade optimism keeps sentiment supported
• German ZEW economic sentiment data is due
• DAX hovers around its record high

The DAX trades just down from its record high reached yesterday ahead of Germany's ZEW economic sentiment data and as investors asses corporate earnings.

Stocks worldwide surged on Monday after Beijing and Washington agreed to a 90-day reduction in the tariffs imposed earlier in April. A de-escalation in the US-China trade war is positive for global growth.

Attention is now turning to the DW economic sentiment data, which they expected to jump sharply higher, too, to 13.7 in May, up from -14. The improved mood came after Frederick Merz 1 was elected chancellor, creating political stability in the country.

The dance is also being boosted by expectations that the ECB will continue to cut interest rates in June, bringing a more favourable climate to corporate Germany.

On the earnings front, Bayer is up 10.8% after posting a slower decline in Q1 adjusted earnings than the market had feared. Strong prescriptions for the drugs of set it dropping its soy and cotton seed business.

Looking ahead to the US session, US inflation could impact sentiment.

DAX forecast- technical analysis

The DAX has extended its recovery from 18,800 low rising above its 50, 100 and 200 SMAs to a peak of 23,930 yesterday, a fresh record high. The RSI supports further gains while it remains out of overbought territory.

Buyers will look to extend gains towards 23,930 and fresh record highs.

Immediate support is at 23, 480, the previous record high. A break below here opens the door to 23,000 round number and 22,275 the 50 SMA.