GBP/USD Outlook: Consolidating Ahead of Employment Data

• Traders awaited UK jobs and inflation figures for hints on the BoE’s monetary policy plans.

• Optimism for further progress in negotiations between Britain and the EU has gone down.

• BoE rate hike forecasts for this year have decreased since last week.

Today’s GBP/USD outlook is slightly bearish. The pound was mostly flat on Tuesday after a previous bearish session. Monday saw a decline in the value of the pound relative to the dollar as traders awaited UK jobs and inflation figures anticipated this week for hints on the Bank of England’s (BoE) monetary policy plans.

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The dwindling optimism for further progress in negotiations between British and European Union diplomats on post-Brexit trade regulations for Northern Ireland adds to the pressure on the pound.

The spokesperson for the British prime minister stated on Monday that there were still considerable differences between the UK and the EU.

On Tuesday and Wednesday, respectively, the government will reveal figures on employment and inflation, which will show how the British economy performed at the end of the previous year.

Rate hike forecasts for this year have decreased since last week, according to Chris Turner, Head of FX Strategy at ING, and data will be important before such predictions are firmed up.

Although wages and inflation may remain high, it is unclear whether this week’s data will contribute to softer expectations. “However, we see those BoE tightening expectations under pressure over the coming months,” he added.

According to the money markets, there is a 65% likelihood of a 50 bps increase, and a 35% chance of a 25 bps increase at the next BoE meeting.

GBP/USD key events today

Investors are awaiting employment data from the UK, including the average earnings index, the claimant count change, the employment change, and the unemployment rate. These reports will show the state of the UK’s labor market.

GBP/USD technical outlook: The price is riding on a pivotal support

The 4-hour chart shows GBP/USD has pulled back after finding resistance at the 1.2276 level. The price is currently in a tight consolidation within a strong support zone. The zone comprises the 1.2200 key level and the 30-SMA. The RSI is trading slightly above 50, showing bears have not yet taken over.

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At this point, the price will either bounce higher and retest the 1.2276 resistance or break below and go for the 1.2101 support level.

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