Noor Trends News, Technical Analysis, Educational Tools and Recommendations
United Kingdom’s Unemployment Rate data mainly pushed the British Pound’s latest rally. The GBP/USD pair is in the hands of the bulls on the front side of an hourly trendline ahead of key Consumer Price Index inflation data scheduled for release on Wednesday.
The GBP/USD bears are eying a break of the solid trendline support and 1.2170 structure that could then result in a cascade of stops being triggered. The GBP/USD is higher by 0.6% at the time of writing at 1.2278. The British Pound moved from a low of 1.2168 to a high of 1.2300 on Tuesday after Britain’s Unemployment Rate data showed the tight labour market and accelerating pay growth.
The Bank of England is attracting attention as it is still battling inflation at multi-decade highs. Britain’s Unemployment Rate held at 3.7%, close to its lowest level in almost 50 years. This was in line with the consensus and signalled a continued tight labour market.
This was the largest increase since records began in 2001. For ex-bonus wage growth, this is the strongest number outside the COVID distortions. Tuesday’s strong data could support the calls for a 50bps hike in BoE’s next policy meeting in February.
The British Pound is the best performing G10 currency on a 1-day view following the data due to the implication that this may mean higher for longer Bank of England, BoE, interest rates. Additionally, the strength of today’s UK earnings data could with hawkish comments by the BoE’s Governor Andrew Bailey mean that tomorrow’s UK December Consumer Price Index inflation data will be the highlight of the week in the forex space.
The Bank of England Governor Andrew Bailey said on Monday that inflation looks set to fall markedly this year as energy prices decrease. However, he said that a shortage of workers in the labour market poses a “major risk” to this scenario.
“I think that going forwards the major risk to inflation coming down … is the supply side – and in this country particularly, the question of the shrinkage of the labour force,” Bailey told lawmakers on parliament’s Treasury Committee.
The ONS’s inflation data on Wednesday is expected to be the next major trigger for the pound ahead of the BoE’s meeting next month. The consumer price index is expected to have eased to 10.5% on an annual basis last month from 10.7% in November.
Even if the BoE has good reason to step up a hawkish tone, there were various instances last year when this failed to boost the sterling, given the weak investment growth, low productivity and overhanging uncertainties about the UK’s post-Brexit relationship with the EU.
GBP/USD is on the backside of both the bearish trend and the bullish corrective trend making for a mixed outlook longer term, but potentially bearish for the nearer term.
