Pound rises after solid job data

The British pound showed gains earlier in the day and punched above the 1.39 line. However, the currency was unable to consolidate these gains. GBP/USD is currently trading at 1.3853, up 0.09% on the day.

UK labor market continues to improve

There was positive news on the UK employment front earlier in the day. The number of payroll employees moved up for a ninth straight month, unemployment rolls continue to fall sharply, and the unemployment rate fell to 4.6%, down from 4.9% beforehand. This is certainly encouraging news, but not to such an extent that Bank of England policymakers will feel much pressure to raise interest rates. If, however, economic activity continues to improve and the Delta variant of Covid is brought under control, the BoE may have to reconsider its wait-and-see policy.

Has US inflation turned a corner?

Inflation remains high on the radar of the markets, and today’s consumer inflation numbers were highly anticipated. The recent spike in inflation levels, which has been fueled by the reopening of economies and the easing of Covid restrictions, has become an important factor in the Fed’s decision-making process. The Fed has insisted that the spike in inflation is temporary, but the markets have become more sceptical as inflation levels continue to climb.

The August CPI numbers pointed to a slight easing in inflation, and may signal that inflation is finally under control. Headline CPI registered a 0.3% gain (MoM), down from 0.5% in July. On an annualized basis, CPI gained 5.3%, down slightly from 5.4% in July. Core CPI dipped to 0.1% (MoM), down from 0.3% in July. Core CPI (YoY) rose 4.0%, down from 4.3% beforehand. If inflation continues to ease, the Fed can afford to delay its tapering plans and this could put downward pressure on the US dollar.

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GBP/USD Technical Analysis

  • There is resistance at 1.3904. Above, there is resistance at 1.3978
  • On the downside, we have support at 1.3742 and 1.3654

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.