The recently released UK labour market data has shown a positive outlook with employment growth exceeding expectations. This news has created a bullish impulse for the pound, with GBP/USD rising initially. However, the fact that the pair retraced towards its initial levels shortly after the release indicates a struggle for bulls to capitalize on the strong data. This could signal the dominance of bears in the market.
Analysts from ING believe that the positive employment growth supports the view that the Bank of England will cut interest rates more cautiously compared to the Federal Reserve. On the other hand, Capital Economics analysts suggest that the Bank of England is unlikely to lower rates for a second consecutive month at the upcoming policy meeting. This conflicting analysis leaves uncertainty about the future direction of interest rates in the UK.
Technical analysis of GBP/USD shows several bearish signals, including the failure to stay above the previous high and the presence of a bearish engulfing pattern at the market’s peak. Additionally, a long upper wick on a recent candlestick adds to the bearish sentiment. The question arises whether bulls can find enough support from the median of the linear regression channel to prevent GBP/USD from continuing its downward trend towards the channel’s lower boundary.
The future direction of GBP/USD will also depend on tomorrow’s US inflation data, specifically the Consumer Price Index (CPI) figures. The release of this data could provide further insight into the economic conditions in the US and potentially influence the forex market. Traders should stay informed and be prepared to react to any developments that may arise from the US inflation data release.
The UK labour market data has presented a mix of positive and negative signals for the GBP/USD pair. While employment growth exceeded expectations, the struggle of bulls to maintain momentum and the presence of bearish signals in technical analysis raise concerns about the future direction of the currency pair. The upcoming US inflation data release will likely play a significant role in determining the short-term trajectory of GBP/USD. Traders should exercise caution and stay informed to navigate the uncertainties in the forex market.