Since the start of this week's trading, the price of the GBP/USD pair was dominated by the performance of the bulls, with gains towards the 1.2300 resistance level. It is stable near it at the time of writing the analysis. This is amid investors abandoning the US dollar since the recent announcement of weaker figures for US inflation.
In contrast, the British economy added more jobs than expected in November while wages grew faster than expected, keeping pressure on the Bank of England to continue raising interest rates. Accordingly, the British pound rose after the Office for National Statistics announced the creation of 27 thousand jobs in the three months to November, which was unchanged from the previous month but stronger than expectations for a slowdown to 5 thousand. The country's unemployment rate remained unchanged at 3.7% while the number of people participating in non-work benefits increased by 19.7 thousand, lower than the 19.8 thousand markets had expected.
Average pay with advanced bonuses included 6.4%, up from October's 6.2% and ahead of expectations of another 6.2%. The rate of wage increase without bonuses was 6.4%.
Pound Heads Higher
The Office for National Statistics warns that despite six consecutive quarterly declines, the number of job vacancies remains at historically high levels, indicating that the labor market remains historically "tight" and consistent with persistent wage inflationary pressures. This confirms the view that the Bank of England can raise interest rates, thus providing support to the pound sterling. The market reaction at the time of writing was largely in line with this theme.
Money market traders are ramping up their bets on a BoE rate hike after near-record UK wage growth highlighted Wednesday's inflation report. They added 6 basis points to their bets, pointing to a bank rate of 4.56% by September, the highest level seen in almost a week. Two-year US Treasury yields - among the most sensitive to changes in monetary policy - rose 5 basis points to a two-week high of 3.57%. The pound was on track to close at a five-week high.
Gas prices have fallen more than 80% from last year's record peak and headline inflation due on Wednesday is expected to slow to 10.5% in December - likely the first consecutive decline since the pandemic hit in 2020. While UK policymakers slowed the pace Tightening to 50 basis points last month, Governor Andrew Bailey warned that risks to the inflation outlook remain tilted to the upside.
GBP/USD analysis today:
- The course of the price of the GBP/USD pair is in a rebound stage to the upside.
- Moving towards the resistance level 1.2330 will confirm this, and move the technical indicators towards overbought levels.
- I still prefer selling the Sterling Dollar from every bullish level despite calming expectations about the future of the Fed's policy. This is offset by bleak expectations for the future of the British economy's recovery.
On the other hand, according to the performance the move towards the support level 1.2095 will end the current bullish move. The sterling-dollar pair will be affected today, first by the announcement of British inflation figures, then the announcement of the results of US economic data, the producer price index and retail sales figures.
Ready to trade our daily Forex analysis? We’ve made a list of the top 10 forex brokers in the UK here.
