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14 Mar 2023

GBP/USD bounces off daily low post-UK jobs data, remains below 1.2200 amid strong USD

  • GBP/USD attracts some dip-buying, though the intraday uptick lacks strong follow-through.
  • The mixed UK jobs data fails to push back against BoE rate hike bets and lends some support.
  • Rebounding US bond yields helps revive the USD demand and acts as a headwind for the pair.

The GBP/USD pair recovers modest intraday losses following the release of the UK monthly employment details and climbs to the top end of its daily range during the early European session on Tuesday. Spot prices, meanwhile, remain below the 1.2200 mark, or a one-month high touched on Monday.

The UK Office for National Statistics reported that the number of people claiming unemployment-related benefits fell by 11.2K in February as compared to the 12.4 decline anticipated. Adding to this, the previous month's reading was also revised to a fall of 30.3K in the Claimant Count Change from 12.9 estimated originally. Furthermore, the jobless rate held steady at 3.7% during the three months to January against expectations for a modest uptick to 3.8%. This, to a larger extent, helped offset a slowdown in the UK wage growth data and does little pushback against market bets for additional rate hikes by the Bank of England (BoE) later this month, which lends some support to the British Pound.

That said, a goodish pickup in the US Dollar demand, bolstered by rebounding US Treasury bond yields, acts as a headwind for the GBP/USD pair, at least for the time being. The uptick in the US bond yields comes after the US authorities moved to limit the fallout from the collapse of Silicon Valley Bank (SNB) and could further be attributed to some repositioning trade ahead of the US consumer inflation figures. However, expectations that the US central bank will slow, if not halt, its interest rate-hiking cycle in the wake of the strain on the US banking system could keep a lid on any meaningful upside for the US bond yields and hold back the USD bulls from placing aggressive bets.

Traders might also prefer to wait on the sidelines and await the release of the crucial US CPI report, due later during the early North American session. This week's US economic docket also features the Producer Price Index (PPI) and monthly Retail Sales figures on Wednesday, which should influence the USD price dynamics and provide some impetus to the GBP/USD pair. The focus, however, will remain glued to next week's key central bank event risks - the outcome of a two-day FOMC meeting on Wednesday, followed by the BoE policy decision on Thursday.

Technical levels to watch

 

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