Pound dips as employment data looms

The pound is down at the start of the week, ahead of the January data report on Tuesday. In the European session, GBP/USD is trading at 1.3551, down 0.31% on the day. It’s a busy week in the UK, which will release inflation data on Wednesday and retail sales on Thursday.

The UK labour market remains robust, with many companies reporting difficulties trying to fill positions. Unemployment rolls fell by 43 thousand in December, and the downtrend is expected to continue in January, with an estimate of 28 thousand. There were concerns that unemployment would go through the roof when the furlough plan was removed, but this didn’t happen. Wage growth in December is expected to dip to 3.6%, down from 3.8% beforehand. This is well behind the pace of inflation, which surged to a 30-year high in December.

In the US, St. Louis Federal Reserve President James Bullard argued that the Fed must move more rapidly in raising rates. Bullard admitted that the Fed was “surprised to the upside on inflation”.  Bullard, who is one of the most hawkish voting members, said last week that the Fed should raise rates by a full percentage point by July. The markets are leaning towards a 50 basis point hike in March, with a 61% likelihood, according to CME’s FedWatch. Bullard added that he was especially concerned with the surge in inflation since it was broad-based and could still be on the rise.

There are other voices in the Fed, of course, and investors will be looking for guidance from the Fed on the course of rate hikes this year. The Fed minutes, which will be released Wednesday, could provide some insights into the Fed’s plans.

.

GBP/USD Technical Analysis

  • GBP/USD is putting pressure on resistance at 1.3642. Above, there is resistance at 1.3756
  • There is support at 1.3400 and 1.3272

Content 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 Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

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.