• The Pound Sterling declines further after the UK ONS reported weaker-than-expected labor market data.
• Employers laid off workers in February, exhibiting the negative impact of higher UK interest rates.
• The market sentiment remains risk-off amid fears of an escalation in Middle East tensions.

The Pound Sterling (GBP) weakens in Tuesday’s London session after the United Kingdom Office for National Statistics (ONS) reported that labor market conditions have significantly cooled down in the three months ending February. The Unemployment Rate grew strongly to 4.2% and the overall labor market witnessed that 156K workers were laid-off.

The labor market data demonstrates uncertainty over the economic outlook, which could force Bank of England (BoE) policymakers to start reducing interest rates earlier than previously expected. Job-seekers and current employees compromise with salary hikes when labor market conditions cool down, which results in slower wage growth that allows high inflation to return to its desired target sustainably.

More volatility is anticipated in the Pound Sterling as the UK ONS will report the consumer and producer inflation data for March, which will be published on Wednesday. The headline Consumer Price Index (CPI) is estimated to rise 3.1%, slower than the prior reading of 3.4%. The core CPI, which strips off volatile food and energy prices, is forecasted to rise 4.1%, slower than 4.5% in February. An expected decline in the inflation data would increase speculation for the BoE beginning to reduce interest rates from the August meeting.