Considering the appreciation of the British pound

 ■ The appreciation trend of the pound has accelerated due to the expected early conclusion of the UK-US trade agreement and the anticipation of a slowdown in the pace of interest rate cuts in the UK. 

 ■ If the UK employment data is weak, the appreciation of the pound may be hindered by concerns about the economic outlook.   

   On May 8, 2025, the British and US governments issued an outline agreement for a new trade framework that includes reducing import tariffs on up to 100,000 British cars and exempting certain steel and aluminum products from tariffs. British Prime Minister Starmer emphasized: "This will benefit British companies and workers and protect thousands of jobs in key industries." Due to the swift conclusion of the UK- US trade agreement, in early June, the pound rose to the 1. 36 US dollar range in the foreign exchange market, reaching a high not seen in 3 years and 4 months; the pound also rebounded to the 196-yen range against the yen, with appreciation momentum strengthening.   

   However, under this measure, the export quota for British cars remains unchanged from last year, and most British products will continue to face a 10% mutual tariff. Additionally, the British government has announced that it will accelerate the pace of climate change countermeasures, putting pressure on automakers to close factories and implement layoffs due to stricter mandatory standards for electric vehicles (EVs). The revised value of the UK Manufacturing Purchasing Managers' Index (PMI) in May was 46. 4, which is higher than the previous month (45. 4), but it has remained below the boom- bust dividing line of 50 for the eighth consecutive month, showing only slight improvement in business confidence.   

   Tonight, the UK National Statistics Office will release the unemployment rate from February to April, expected to rise to 4. 6%, the highest level since May to July 2021; the number of employed individuals is anticipated to increase by 50, 000 from the previous month, while the year- on- year growth rate of average wages excluding bonuses is projected to slow to 5. 3%. If signs of a slowdown in the labor market intensify further, personal consumption, which accounts for more than 60% of the UK's GDP, may decelerate, raising concerns about the economic outlook. Although GBP/USD rebounded after hitting a low of $ 1.3409 on May 29, GBP/JPY also rebounded after reaching a low of 192. 65 yen on June 3, if employment data is poor, GBP/USD will still be far from the January 2022 high of $ 1.3748, and GBP/JPY will remain distant from the key psychological level of 200 yen. In the short term, it may maintain a high-level consolidation pattern.