GBP/USD calm ahead of UK job report

• UK employment data expected to soften
• UK will release inflation report on Wednesday

The British pound has edged higher on Monday. In the European session, GBP/USD is trading at 122.48, up 0.18%. The pound is coming off a nasty week, in which it declined 1.2%.

UK employment data expected to cool

The UK labour market has been resilient despite the Bank of England’s aggressive tightening but is showing some cracks. We’ll get a look at key employment numbers on Wednesday. Job growth is expected to fall by 80,000 in the three months to September, after a massive loss of 207,000 in the previous release. Average earnings including bonuses are expected to slow to 7.4% in the three months to August, down from 8.1%. The BoE will be keeping a close look at wage growth, which is a significant driver of inflation.

The UK releases the inflation report on Wednesday, with the markets expecting CPI to have fallen sharply in October from 6.7% to 4.8%. If inflation falls below 5%, it would mark a milestone in the government’s tough battle with inflation, although the 2% target remains far, far away. Core CPI, which excludes food and energy, is expected to show a modest drop to 5.8%, down from 6.1% in September.

The BoE is projecting that inflation will fall back to the 2% target at the end of 2025, six months later than the previous forecast. Governor Bailey has been stressing that inflation remains too high but the BoE nevertheless voted to hold rates at this month’s meeting after 14 consecutive hikes. Another pause at the December meeting would be the central bank’s preferred plan of action but that will depend on the data.

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GBP/USD Technical

• There is resistance at 1.2287 and 1.2344
• 1.2183 and 1.2091 and are providing support

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