Labor, Gold, and USD Under Pressure
UK Labour Market Weakness & Interest Rate Outlook
The UK unemployment rate rose more than expected in May, according to Thursday’s data, while wage growth slowed slightly — providing the Bank of England (BoE) room to cut interest rates again next month.
The unemployment rate climbed to 4.7% in the three months to May, up from 4.6% previously, surpassing expectations. This is the highest level since June 2021.
Wage growth across the economy, excluding bonuses, slowed to an annual rate of 5.0%, down from the revised 5.3% in the previous period.
This weakness in the labor market, combined with slower wage growth, is likely to encourage BoE policymakers to lower rates again in August, following four quarter-point cuts since last year.
UK inflation has steadily climbed, reaching 3.6% in June, the highest in over a year, though the BoE anticipates inflation to return to target by Q1 2027.
Meanwhile, GDP data showed an unexpected contraction in May, hinting at broader economic sluggishness.
Gold Prices & Metals Amid Global Uncertainty
Gold prices dipped in Asian trading on Thursday, with some improvement in risk sentiment after US President Donald Trump downplayed the likelihood of firing Fed Chair Jerome Powell.
Broader metals also remained flat due to the strong US Dollar, which stabilized near a three-week high after the recent inflation data.
Despite this, demand for gold as a safe haven remains strong, especially amid the tariff uncertainties imposed by Trump, which are set to take effect in two weeks.
Platinum and silver largely outperformed gold.
Trump, the Fed, and the Resilient Dollar
Trump stated on Wednesday that it is “highly unlikely” he would dismiss Fed Chair Powell, though it remains possible if fraud is found in the Fed’s ongoing renovation project.
Concerns about Powell’s job security grew after Trump intensified his criticism of the Fed, with some Republicans echoing calls for Powell’s removal.
Trump accused Powell of being too slow in cutting US rates and demanded immediate action to prevent economic damage. However, Powell and several Fed policymakers indicated that rates would remain unchanged until the inflationary impact of Trump’s tariffs becomes clearer.
This moderation by Trump helped marginally improve market sentiment, reducing short-term demand for gold and boosting US stocks.
The Fed is widely expected to hold rates steady this month, especially after recent inflation data showed sustained price pressures in June.
The Dollar remains strong, supported by expectations for retail sales and jobless claims data to provide further economic insights.
Conclusion:
The global economic landscape remains fragile — with the UK labor market weakening, gold markets swaying with political signals, and the Dollar showing strength. Traders should stay vigilant and adaptive with informed strategies.
