Sterling falls despite sparkling job data

The pound is down in the Tuesday session. In European trade, GBP/USD is trading at 1.4065, down 0.25% on the day.

UK employment numbers impress

The UK recorded some excellent employment numbers on Tuesday, which suggests that the labour market is on the way to recovery. Wage growth soared to 5.6%, up from 4.0% and well above the consensus of 4.9%. Unemployment rolls fell by 92.6 thousand, the best reading in over a decade and much better than the forecast of +25.0 thousand. The labor market is reaping the rewards of the reopening of the economy. The pound did not respond positively to the strong numbers, falling to a 1-month low. Investors may have displayed some dismay at the government’s decision to postpone the lifting of all health restrictions for another month. This decision was taken in response to a jump in the number of cases of the Covid Delta variant and there are concerns that this variant could cause a Covid resurgence worldwide.

The markets are keeping a close eye on the FOMC policy meeting on Wednesday. The Fed has stuck to its script that it will continue its ultra-loose policy, but investors will need to hear this message again, as US CPI has been above the consensus for two straight months. Fed policymakers may feel that the time is ripe to gradually introduce debate around when to begin a taper of QE, or they could opt to breach the topic at another time, perhaps at the Jackson Hole economic forum in August. If the Fed does provide any hints of a tightening in policy, we can expect the US dollar to respond with gains.

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GBP/USD Technical Analysis

• GBP/USD is facing resistance at 1.4248. Above, there is resistance at 1.4332
• On the downside, the pair is testing support at 1.4082. The next support level is at the round number of 1.4000

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/

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