GBP/USD: Cable bulls push on to test 1.2850/00 – Scotiabank

The Pound Sterling (GBP) picked up —briefly—in response to this morning’s UK labour market data. Unemployment fell unexpectedly in June, dropping to 4.2% (versus and expected rise to 4.5%, from May’s 4.4%).

A break above 1.2850/00 is possible

“Wage data was largely in line with forecasts though. Average weekly earnings eased to 4.5% in the June quarter over last year (from 5.7%), a little lower than expected, while ex-bonus pay remains relatively elevated, gaining 5.4% in the period (down from a revised 5.8% in May).”

“Cable has given back all of the gains made on the data at writing but a September BoE rate cut remains unlikely (swaps are pricing in 8-9bps of easing risk). BoE Governor Mann commented in the FT Monday that wage growth was still a worry for inflation. Mann voted to hold rates at the policy meeting earlier this month when the MPC narrowly voted in favour of a cut.”

“The GBP gave back earlier gains easily but the broader technical undertone for Cable remains positive following the development of the noted bull reversal off the 200-day MA (1.2667) test last week. Corrective gains are stalling around retracement resistance at 1.2810 but an advance through the low 1.28s should see Cable push on to test 1.2850/00.”