GBP/USD steady ahead of jobs data

• UK wages expected to accelerate by 7.9%
• US retail sales projected to rise 0.4%

The British pound is quiet at the start of the week. In the European session, GBP/USD is trading at 1.2701, up 0.05%.

UK wage growth expected to jump

The UK releases key employment numbers on Tuesday and the data is expected to show that the UK labour market remains tight. The economy is expected to have created 50,000 jobs in the three months to June. That number is down from 125,000 previously, but unemployment claims are expected to drop by 7,300, down from a gain of 25,700 previously. Most importantly, wage growth including bonuses is expected to jump to 7.3% in the three months to May, compared to 6.9% in the previous three months.

A jump in wage growth will not be welcome news for the Bank of England, which has had limited success in its battle to rein in inflation. Wage growth has been elevated due to high inflation and the tight labour market and an acceleration in wages will support a rate hike at the September meeting. The BoE has raised rates to 5.25%, but inflation has fallen more slowly than expected and is currently at 7.9%, the worst in the G-7.

Over in the US, the markets are widely expecting the Fed to pause at the September 20^th meeting. That will allow the markets to focus on key releases and try to determine if the economy is too strong, which could mean further rate hikes late in the year.

Retail sales, which will be released on Tuesday, will provide a snapshot of whether consumers are still spending despite inflation and rising interest rates. Both the headline and core rates are expected to rise by 0.4% in July after a 0.2% gain in June.

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GBP/USD Technical

• GBP/USD is putting pressure on resistance at 1.2726. The next resistance line is 1.2787
•  1.2634 and 1.2573 are providing support

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