The recent release of UK labour market data has shown that employment growth exceeded expectations, which is a positive sign for the economy. This news has led to a bullish impulse for the pound, with GBP/USD rising initially. However, the pair retraced shortly after, indicating that bulls are struggling to take advantage of the strong data. This could be a signal of the dominance of bears in the market.
Analysts from ING believe that the positive labour market data supports the view that the Bank of England will cut interest rates more cautiously compared to the Federal Reserve. Meanwhile, 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 indicates a cautious approach by the central bank towards monetary policy adjustments.
The technical analysis of GBP/USD shows some bearish signals, such as the failure to stay above the previous high and a bearish engulfing pattern at the market’s peak. Additionally, the presence of a long upper wick on a recent candlestick points to potential downward pressure on the currency pair. Bulls may find support from the median of the linear regression channel, but it remains to be seen if this will be enough to prevent further downside movement.
Impact of US Inflation Data
The future direction of GBP/USD may also depend on tomorrow’s US inflation data release. The Consumer Price Index (CPI) figures will provide insight into the state of the US economy, which could influence the currency pair’s movement. Traders should keep a close eye on these data releases to make informed decisions in the forex market.
It is essential for traders to stay updated on economic indicators and central bank policies to navigate the ever-changing forex market. The recent labour market data release in the UK has provided some insights into the state of the economy, but external factors such as US inflation data can also impact currency movements. By analyzing the technical indicators and fundamental factors affecting currency pairs, traders can make informed decisions and manage risks effectively.
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