The Pound Sterling (GBP) has crept a little higher over the course of the trading day so far. UK data showed in line with expectations wage growth (4.0% Y/Y for Average Weekly Earnings in the July quarter, 5.1% for ex-bonus pay) and a marginal fall in the unemployment rate (4.1%, from 4.2%) over the same period.
Intraday Trend Signals Neutral for GBP
According to experts, policymakers will welcome slower wage growth but gains are still too rich to be compatible with the BoE’s inflation target. Swaps are pricing in marginally less risk of an already unlikely BoE cut next week as a result (4bps of easing versus 5-6bps yesterday).
Analysts also note that while there are negative daily and weekly prints on the GBP charts, there is also residual bullish momentum reflected in oscillator studies. This could potentially curb downside impulses for now, despite the downside risks in the near-term.
Short-term patterns on the GBP/USD look corrective after the August rally in the pound, indicating more range trading with a mild downside bias for now. Support levels are at 1.3050/60, while resistance levels are at 1.3110 and 1.3145/50.
Analysis and Breakdown
In simple terms, the Pound Sterling has shown a slight increase in value following UK data that met expectations. While wage growth is slower, it is still too high for the Bank of England’s inflation target. This has resulted in a lower likelihood of a rate cut next week. The GBP/USD charts show a mix of negative and positive signals, but overall, there is still bullish momentum in the market. Short-term trends suggest some downside potential, but with support and resistance levels in place, the currency pair is expected to trade within a certain range.