GBP/USD drifting, UK employment report next

• UK retail sales slide in September
• UK releases employment data on Tuesday

The British pound is showing very limited movement on Monday. In the North American session, GBP/USD is trading at 1.2154, down 0.07%

UK employment expected to slide

The UK delayed has delayed the release of employment and unemployment data until Tuesday, after releasing wage growth last week. Wages including bonuses dropped from 8.5% to 8.1%, which is still very high and is driving inflation. Job growth is expected to drop by 198,000 in the three months to September, after a massive decline of 207,000 previously. The unemployment level is expected to remain at 4.3%.

UK retail sales cool 

UK retail sales disappointed in September, as warm weather and the cost-of-living crisis dampened purchases of autumn clothing. Retail sales slipped 0.9% m/m in September, versus a 0.4% gain in August and below the consensus estimate of -0.2%. On an annualized basis, retail sales declined by 1.0% in September, following a revised -1.3% in August and shy of the consensus estimate of -0.1%.

The soft retail sales report will likely reduce growth in the third quarter and that could mean a contraction in GDP in Q3. Consumers have been squeezed by cost of living pressures and are spending more and getting less in return. Inflation is galloping at 6.7%, the highest in the G-7. Against this grim backdrop, GfK consumer confidence fell to -30 in September, down from -21 a month earlier and well below the consensus estimate of -20. The GfK report noted that high fuel costs, elevated borrowing costs and the Middle East conflict were driving growing unease among consumers.

Federal Reserve Chair Powell spoke on Thursday, warning that inflation remained too high and bringing it down to the 2% target would require the economy and the labour market to cool. Powell was non-committal about further rate hikes, noting that the spike in long-term Treasuries could dampen inflation without the Fed having to act. Powell’s remarks were perceived as somewhat dovish by the markets, as the Fed rate odds of a hike in December, which were as high as 45% last week, fell to 20% on Friday, according to the CME FedWatch.

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GBP/USD Technical

• GBP/USD tested support at 1.2158 earlier. Below, there is support at 1.2097
• There is resistance at 1.2227 and 1.2288

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