The British pound has barely made a peep so far this week. Currently, GBP/USD is trading at 1.3689, up 0.10% on the day.
Employment data beats forecast
UK job numbers ended the year on a high note, as all three employment indicators beat the consensus estimate. Wage growth climbed 3.6% in the September-November period on an annual basis, up from 2.7% and its highest level in a year. This was up sharply from 2.7% and well above the estimate of 2.9%. Claimant Count Change dropped to 7 thousand in December, down from 64.3 thousand beforehand and below the forecast of 47.5 thousand. The unemployment rate nudged up from 4.9% to 5.0%, but managed to beat the estimate of 5.1%.
Investors did not give the pound a thumbs-up today, despite the strong numbers. The unemployment rate may have soured the mood, as the rate rose to the symbolic 5 per cent level for the first time since 2016, and also marked a fifth straight increase in unemployment. There is also some question about the accurateness of this figure – in December, BoE Governor Bailey stated that he believed that the actual unemployment rate was higher, since the official release excludes job seekers who have stopped looking for work due to Covid-19.
Fed expected to reiterate dovish stance
The Federal Reserve holds its first policy meeting of the year on Wednesday, and Fed Chair Powell & Co. are expected to reiterate a dovish message to the markets. If the rate statement or follow-up press conference sound too dovish for the market’s taste, the US dollar could lose ground. Conversely, if Powell doesn’t put speculation of tapering to rest in his post-meeting remarks, the US dollar short squeeze could resume. The Fed has been pleading for further fiscal support from the government for months, and it looks like Powell will have a close ally in Janet Yellen at Treasury.
GBP/USD Technical
- GBP/USD faces resistance at 1.3777. Above, there is resistance at 1.3875
- There is support at 1.3533, followed by support at 1.3423
- The 50-day moving average (MA) is situated at 1.3477
