- GBP/USD regained some positive traction on Tuesday and jumped to mid-1.3400s.
- A combination of factors acted as a tailwind for the sterling and remained supportive.
- Hawkish Fed expectations underpinned the USD and capped gains amid Brexit woes.
The GBP/USD pair refreshed daily tops, around mid-1.3400s in reaction to mostly upbeat UK employment details, albeit lacked any follow-through buying.
Having defended the 1.3400 round figure, the GBP/USD pair attracted fresh buying on Wednesday and was supported by the overnight hawkish comments by the Bank of England (BOE) Governor Andrew Bailey. Speaking before the UK Parliament Treasury Select Committee, Bailey said that he was very uneasy about the inflation outlook and that all future policy meetings are now in play for a rate rise.
The sterling got an additional boost heading into the European session after data released from the UK showed that the jobless rate declined more than expected, to 4.3% during the three months to September. Additional details of the report showed that the number of people claiming unemployment-related benefits dropped by 14.9K in October as against the fall of 51.1K reported in the previous month.
This, along with the risk that Britain will trigger Article 16 and suspend parts of the Northern Ireland Protocol, act as a headwind for the British pound. Apart from this, the underlying bullish sentiment surrounding the US dollar – amid the prospects for an early policy tightening by the Fed – further collaborated to keep a lid on any meaningful upside for the GBP/USD pair.
Hence, the market focus will remain glued to the incoming Brexit-related headlines, which will play a key role in influencing the sentiment surrounding the sterling. Traders on Tuesday will further take cues from the release of US monthly Retail Sales figures, due later during the early North American session. The data could produce some short-term opportunities around the GBP/USD pair.
Technical levels to watch
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