The GBP/USD pair rebounded into the 1.3100s on Tuesday after a strong UK labor market report boosted the Pound Sterling. Earlier losses in the pair were a result of a stronger US Dollar, as markets scaled back expectations of aggressive interest rate cuts by the US Federal Reserve. The US economy’s resilience has led to reduced fears of a recession, which has bolstered demand for the USD.
Despite positive UK jobs data, the GBP/USD pair failed to rise significantly. The unemployment rate fell to 4.0% in the three months to August, while employment saw a significant rise. However, concerns were raised with a slight increase in the claimant count for September. Nonetheless, the data has lessened the likelihood of the Bank of England cutting interest rates at their next meeting in November.
On the calendar, GBP/USD is likely to be influenced more by speeches from Fed officials rather than data releases. UK inflation metrics, including the Consumer Price Index (CPI) and Producer Price Index (PPI), due on Wednesday could impact the Pound Sterling as they are key factors in BoE decisions on interest rates. Inflation data for September will be closely watched as BoE officials have hinted at a possible rate cut in November.
From a technical standpoint, GBP/USD has reached the bottom of its slope and is showing signs of bouncing back. The pair has been on a downward trend since late September but is finding support around the 1.3005 level. A break below 1.3000 could signal further downside, with support expected around 1.2950. The Relative Strength Index (RSI) is low but not oversold, indicating the potential for more downside.
One economic indicator to watch is the Claimant Count Change, which tracks the number of unemployed people in the UK claiming benefits. A higher reading is seen as bearish for the Pound Sterling, suggesting negative implications for consumer spending and economic growth. On the other hand, a lower reading is viewed as bullish for the GBP. This metric has the potential to influence GBP volatility in the market.
Overall, the GBP/USD pair has rebounded from earlier losses, driven by strong UK jobs data and reduced fears of aggressive interest rate cuts by the US Federal Reserve. The focus remains on upcoming speeches from Fed officials and UK inflation data, which could impact the direction of the pair. From a technical perspective, GBP/USD is showing signs of a potential bounce back but remains vulnerable to further downside if key support levels are breached. Investors will be closely monitoring economic indicators to gauge the strength of the Pound Sterling against the US Dollar in the coming days.
