GBP/USD Forecast: Softer Wage Growth Weighs on Pound Sterling

Modified: Tuesday, 19 May 2026 20:01 BST - Written by David Woodsmith

STORY LINK GBP/USD Forecast: Softer Wage Growth Weighs on Pound Sterling

The Pound US Dollar (GBP/USD) exchange rate moved lower on Tuesday following the release of weaker-than-expected UK labour market figures.

At the time of writing, GBP/USD was trading at around $1.3396, down roughly 0.4% from the opening levels of Tuesday’s session.

The Pound (GBP) came under pressure on Tuesday as disappointing labour market data brought Sterling’s recent gains to a halt.

According to figures released by the Office for National Statistics (ONS), the UK unemployment rate unexpectedly ticked up from 4.9% to 5% in March, while wage growth slowed from 3.6% to 3.4%.

The easing in pay growth unsettled GBP investors in particular, as it suggested household incomes are struggling to keep pace with inflation amid elevated energy prices linked to the ongoing Middle East crisis.

As a result, markets scaled back expectations for further monetary tightening from the Bank of England (BoE), with some analysts questioning whether policymakers will still move ahead with a rate hike in June.

The US Dollar (USD) strengthened modestly on Tuesday as investors continued to favour safer assets amid lingering geopolitical uncertainty.

Market caution remained tied to developments in the Middle East, where tensions between the US and Iran continue to cloud investor sentiment.

Late on Monday, US President Donald Trump claimed via social media that he had abandoned plans for military action against Iran following appeals from Gulf nations and because ‘serious negotiations’ were underway.

Despite the comments, markets remained sceptical, with many investors unconvinced that a breakthrough in talks is close given the significant divisions that remain between Washington and Tehran.

Near-Term GBP/USD Forecast: Softer UK Inflation to Pressure Sterling?

Looking ahead, the Pound to US Dollar (GBP/USD) exchange rate may remain on the back foot on Wednesday with the release of the UK’s latest inflation figures.

Economists expect April’s consumer price index to show inflation cooling, despite elevated global energy prices, which could further reduce expectations for a near-term BoE interest rate increase.

Meanwhile, USD investors will be closely watching the publication of the minutes from the Federal Reserve’s latest policy meeting.

If the minutes suggest policymakers are becoming more concerned about inflation risks and open to further tightening, the US Dollar could strengthen further through the midweek session.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Dollar Forecasts