The British pound is in positive territory on Tuesday. In the European session, GBP/USD is trading at 1.3461, up 0.22% on the day. The pound has jumped 1.9% in August and touched a high of 1.3476 on Monday, its highest level since July 25.
Job openings drop, wage growth steady
The UK labor market continues to cool. Job openings fell by 5.8% across most industries and the nunber of payrolled employeees also declined. However, the slowdown was not as bad as expected and didn’t boost the unemployment rate, which remained at 4.7%.
The labor market is feeling the effect of higher employer national insurance contributions and a rise in the minimum wage, as employers continue to cut back on hiring.
The Bank of England has been cautious in its rate path and last week’s cut was only the second this year. The split vote at the rate meeting reflects the conundrum that Bank policymakers face regarding rates – the UK economy is weak and the labor market is slowing, but inflation has been moving higher. The Bank is expected to cut rates again in November but that will depend on the employment and inflation numbers.
US inflation expected to hit to 2.8%
The US releases the July inflation report later today. Inflation is is expected to inch higher to 2.8% y/y, up from 2.7% y/y in June. This would mark a third straight acceleration and the highest inflation level since February. Core CPI is also expected to accelerate to 3.0%, up from 2.9%.
Monthly, CPI is projected to ease to 0.2% from 0.3%. Core CPI is projected to rise to 0.3% from 0.2%.
Today’s inflation report could shift market expectations for the September Fed meeting but a Fed cut will likely remain on track. The markets have currently priced in the likelihood of a rate cut at 84%, according to FedWatch’s CME.
GBP/USD Technical
- GBP/USD has pushed above resistance at 1.3436 and is testing 1.3453. Next, there is resistance at 1.3487
- 1.3402 and 1.3385 are providing support
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