British Pound Rallies Amidst Volatility Ahead of Key Employment Data

British pound posts strong gains
UK to release employment report on Tuesday

The British pound has started the week with strong gains. In the North American session, GBP/USD is trading at 1.2537, up 0.61%. The pound has been on a nasty slide, falling as much as 300 basis points since August 31st.

The volatility could continue for the pound on Tuesday, with the release of key employment data. The labour market is showing signs of slowing down and the economy is expected to have shed 185,000 jobs in the three months to July on top of the loss of 66,000 a month earlier. If the consensus is within expectations, it would mark a massive job loss and would support the BoE taking a pause at next week’s rate meeting.

At the same time, wage growth remains high, which is driving inflation. Average earnings including bonuses are expected to remain unchanged at 8.2% in the three months to July. The June reading was the highest since July 2021, as employers are in urgent need of workers.

The Bank of England has been non-committal about what it will do at next week’s meeting, although Governor Bailey said last week that the BoE was “much nearer” to ending the current tightening cycle. Bailey also said that the BoE might have to raise rates further due to persistently high inflation.

Inflation has been falling but has been stickier than expected. Bailey may be trying to calm the markets with the message that rate hikes could end soon, while keeping further increases on the table, given that inflation remains above the Bank’s 2% target.

GBP/USD Technical

GBP/USD is testing resistance at 1.2519. Above, there is resistance at 1.2592
There is support at 1.2441 and 1.2395

Kenny Fisher

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.