The British pound continues to make inroads against the US dollar. GBP/USD is currently trading at 1.3389, up 0.45% on the day. The pound has gained 1.2% this week and is putting pressure on the 1.34 level.
UK posts mixed job numbers
UK wage growth has been on a steady upswing and rose an impressive 2.7% in October. This was up sharply from 1.3% beforehand. However, unemployment claims rose by 64.3 thousand in November, after a decline of 29.8 a month earlier. The reading was much higher than the estimate of 10.5 thousand. As well, the unemployment rate rose for a fourth straight time, climbing from 4.8% t0 4.9%. The Covid pandemic continues to take a toll on the labour market, and with parts of the UK under lockdown, the unemployment numbers could get even worse.
Wednesday will also be busy, with the release of inflation and PMI reports (7:00 GMT). Inflation is not expected to show much change in November, with estimates of 0.6% for headline CPI and 1.4% for Core CPI. Services and Manufacturing PMIs are expected to improve in November. Manufacturing PMI has posted readings in the mid-5o range, which is well into expansionary territory. The index is expected to rise from 55.5 to 55.9 points. Services PMI fell to 45.8 in October, its first foray into contraction territory since May. The index is projected to push across the neutral 50-line, with a forecast of 50.5 points. Any unexpected readings from these key inflation and PMI releases could affect the movement of GBP/USD.
Brexit talks continue
On Monday, the pound was up over 1.1% at one point, as investors were relieved that the Brexit negotiations would continue past a self-imposed Sunday deadline. However, key sticking points remain, such as the EU insistence on a level playing field and EU’s right to impose unilateral tariffs if the UK breached EU trade rules. The markets have priced in an agreement being reached, and it appears that the sides are indeed close to a deal, which would likely send the pound sharply higher.
GBP/USD Technical
- GBP/USD faces resistance at 1.3418. Above, there is resistance at 1.3510
- We find strong support at 1.3262, followed by a support line at 1.3198
- The pair is trading just above the 20-day MA
