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On Monday, with the beginning of the new trading week, the GBP/USD pair edges higher after posting the biggest daily jump in a month. Optimism surrounding an end to the UK’s labour strike is leaving a positive fingerprint on the Sterling in addition to the US dollar’s pullback which contributes to underpin the pair’s rebound.
The GBP/USD pair advances towards 1.2150 while extending the week-start rebound from the key technical support to early Tuesday morning in Asia. In doing so, the pair cheers the broad US dollar’s pullback, as well as the risk-on mood, amid positive catalysts emanating from the UK.
The pair is trading at 1.2140 at the time of writing. Adding strength to the quote’s recovery could be the trader’s preparations for the UK’s monthly employment data and the US Consumer Price Index for January.
An end to the 20-day strikes by the London bus drivers and the British firms’ readiness to inflate the workers’ pay by the most since 2012 seemed to have favored the GBP/USD buyers of late. The news becomes more important as BoE policymaker Jonathan Haskel highlighted that further rate hikes will depend upon the incoming data.
BoE’s Haskel said that he cited a rise in activity in the UK labor market. BoE’s Haskel also mentioned, “I would prefer to make policy with much more attention on the data flow over the next few months.”
The British government is yet to seal a major victory over the labor issues and hence the same challenges the Cable buyers. The week began with a risk-off mood amid the US-China tensions surrounding the mystery objects that flew over their boundaries and allegations of spying.
However, the US General turned down the fears while rejecting calls to believe that those flying objects were from China. Adding strength to the risk-on mood were upbeat US equities and a pullback in the US Treasury bond yields after multiple days of run-up.
Fed’s Michelle Bowman said on Monday that the US central bank will need to continue to raise interest rates in order to get them to a level high enough to bring inflation back down to the central bank’s target rate, per Reuters. Before him, Philadelphia Federal Reserve President Patrick Harker pushed back the chatters of a Fed rate cut during 2023.
However, the policymaker mentioned, “Fed not likely to cut this year but may be able to in 2024 if inflation starts ebbing.” His comments were mostly in line with Fed Chair Jerome Powell’s cautious optimism and exerted downside pressure on the US dollar.
Looking ahead, the GBP/USD may remain firmer amid the US Dollar’s positioning for the key data. However, downbeat prints of the UK jobs report won’t hesitate to recall the pair sellers as the US inflation expectations have been firmer of late. As per the consensus, the UK’s Unemployment Rate is expected to remain unchanged at 3.7% for three months to December 2022. Further, the US CPI could ease to 6.2% YoY versus 6.5% prior.
Technically; although the 100-day Exponential Moving Average (EMA), around 1.2040 by the press time, puts a floor under the GBP/USD prices, the Cable pair’s further upside needs validation from the 200-day EMA, around 1.2140 at the latest.
