The Pound Sterling (GBP) rebounds strongly as bearish market sentiment eases, while the broader bias is still vulnerable. The GBP/USD pair recovers sw
recovers swiftly ahead of the United Kingdom’s Employment report for July, which will demonstrate current labor market conditions. Investors will keenly focus on wage growth momentum, which has remained a major trigger for keeping inflationary pressure extremely stubborn.
are performing in a high-inflation environment. Investors will also look for commentaries from BoE policymakers to get cues about how much the current interest rates are close to their peak. Slow wage growth and slim recruitment levels should ease pressure from BoE policymakers.Pound Sterling recovers significantly after defending the crucial support of 1.2450 as the appeal for risk-perceived currencies improves. The asset rebounds strongly after a fresh three-month low ahead of the UK’s labor market report for July, which will be published on September 12 at 06:00 GMT. Per estimates, the quarter ending in July Unemployment Rate is seen rising to 4.3% vs. the previous reading of 4.2%. A higher jobless rate would ease pressure stemming from a tight labor market for Bank of England policymakers as labor shortages have remained a major trigger for inflation. Three months to July Average Earnings excluding bonuses are seen lower at 7.6% vs. the prior reading of 7.8%. Slower wage growth would be welcomed by BoE policymakers as household demand may cool down ahead. Higher wage growth momentum has been a big worry for BoE policymakers. BoE Governor Andrew Bailey warned last week that there has been no let-up in the pace of wage growth. UK’s Claimant Count Change for August is seen declining to 17.1K vs. July’s reading of 29K. Lower benefit claims indicate that labor demand remained decent from employers. Speeches from BoE policymakers are also due: BoE Economist Huw Pill and BoE member Catherine Mann on Monday and Tuesday, respectively, are set to speak. The Pound Sterling could come under pressure if BoE policymakers also cite current interest rates as “sufficiently restrictive” or comment that policy tightening is nearing its end, which was said by the BoE’s Bailey and Swati Dhingra last week. Investors hope that an end to interest rate tightening by the BoE is not as far off as previously believed. Andrew Bailey commented: "Many of the indicators are now moving as we would expect them to move and are signaling that the fall in inflation will continue.” The UK’s economy is showing signs of broader weakening, a cooling labor market, and slowing consumer spending momentum, which should cause inflationary pressure to yield. For September monetary policy, it is widely expected that the BoE will raise interest rates for the 15th consecutive time. An interest-rate hike of 25 basis points is expected, which would push interest rates to 5.50%. The US Dollar Index corrected sharply to near 104.60 after sensing exhaustion in the upside momentum near almost a six-month high of 105.00. The broader bias is still bullish due to global growth concerns and the inflation data for August, which will be published in July. Any surprise upside in inflation data would force Federal Reserve policymakers to keep the doors open for further policy tightening. The US Dollar faces pressure on Monday as China’s inflation for August, released on Saturday, rebounded nominally, indicating an easing of deflation risks. On a broader note, the Chinese economy is still vulnerable amid a slowdown in the property sector and retail demand.The Pound Sterling prints a fresh two-day high, testing territory above the psychological resistance of 1.2500 after discovering buying interest near a three-month low around 1.2450. The Cable attempts to defend the crucial support of the 200-day Exponential Moving Average , which lands near 1.2490. While the short trend is bearish as the 20 and 50-day EMAs are downward-sloping, momentum oscillators portray strength in the bearish impulse.The Pound Sterling is the oldest currency in the world and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, aka ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders , and EUR/GBP . The Pound Sterling is issued by the Bank of England .The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. 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