GBP/USD consolidates its losses above the 1.2500 mark following UK labor data
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- GBP/USD holds above 1.2500, lacks firm direction.
- UK Unemployment Rate 3M to July came in at 4.3% from 4.2% in the previous reading.
- Higher for longer interest rate narrative in the US boosts the US Dollar.
- Investors will monitor the monthly UK GDP report and US Consumer Price Index (CPI) on Wednesday.
The GBP/USD pair consolidates its recent losses above the 1.2500 area during the early European trading hours on Tuesday. The major pair currently trades near 1.2515, up 0.04% on the day.
The latest data UK’s Office for National Statistics revealed that the UK Unemployment Rate in the three months to July came in at 4.3% from 4.2% in the previous reading, in line with the market consensus. Meanwhile, Employment Change for July declined by 207K from a 66K drop in the previous reading, worse than the estimated 185K drop. The Average Earnings Including Bonus in the three months to July rose by 8.5% versus 8.2% prior. Excluding bonus, the figure remains at 7.8%, as expected.
Catherine Mann, a Bank of England (BoE) policymaker, stated on Monday that it was too early for the central bank to pause interest rates and that it was preferable for the central bank to err on the side of raising them too high rather than halting too soon. The hawkish comment by BoE policymakers might limit the downside for the British Pound and act as a tailwind for GBP/USD.
Across the pond, the higher for longer interest rate narrative in the US lifts the US Dollar (USD) against the GBP The markets have been priced in the possibility of a 92% chance of a rate hold at the September meeting and a 42.4% chance of a rate hike at the November meeting, according to the CME FedWatch Tool.
US Treasury Secretary Janet Yellen said on Sunday that she is becoming more convinced that the US will be able to curb inflation without causing major impacts on the labor market. She added that every gauge of inflation is erasing and there was no massive wave of layoffs.
Market players will shift their focus to the monthly UK GDP report and Manufacturing Production for July due on Wednesday. Also, the highly anticipated US Consumer Price Index (CPI) data will be released in the North American session on Wednesday. Traders will find the trading opportunity around the GBP/USD pair.
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