Early employment data released on Tuesday showed a record 241,000 new members of staff were added to payroll across the UK in August. Later on in the day the USD came under pressure after data showed a less than expected rise in inflation, which could setback the timing of the reversal of the tapering of the US Feds asset purchases.
The pound briefly touched a 5 week high 1.3913 against the dollar and pushed just over 1.1750 against the EURO, however given that the Fed stated that they do not expect inflation to make substantial progress, the pressure on the dollar may be short-lived. EUR/USD moved to around 1.1820 after the news.
Post lockdown recovery in the UK has been closely analysed of late, mainly with eyes focused on the Bank of England’s stance towards interest rates. Policymakers at the BOE expect inflation to rise sharply to a peak of 4%, which points towards a tightening of its monetary policy sooner than that of the ECB or US FED. Analysts currently predict that the BOE will start to hike rates towards the end of 2022.
The pound later erased its gains, falling to around 1.3815 against the USD and dipped briefly below 1.17 against the EURO.
Resistance on GBP/USD is at 1.3895, the next levels to watch are 1.3950, 1.3985 and 1.4010.
Support awaits at 1.3785, followed by 1.3725, and then 1.3675.