GBP/USD: Bulls in control ahead of the UK employment data
- The GBP/USD soared to its highest level in close to three years on Friday.
- This performance was due to the optimism of the UK economy.
- The pair will react to the upcoming UK employment numbers.
The GBP/USD is hovering near its highest level since March 2018 as investors cheer the ongoing vaccination program and the ongoing recovery of the UK economy. The pair is trading at 1.4016, which is a few pips below Friday’s high of 1.4050.
The British pound has been rallying
Sterling has been among the best-performing currencies in the developed world. It has risen by more than 20% from its lowest level in 2020.
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This performance is mostly because of three key factors. First, the UK and the European Union have already reached a Brexit deal, erasing the likelihood of new tariffs between the two sides. Before the deal, there was a general fear that the two sides would not agree on key issues like fisheries.
Second, while the UK was among the most affected countries by the pandemic, it has become one of the best in terms of vaccinations. In a recent statement, the government said that it had already vaccinated more than 15 million people. This means that it will soon vaccinate a significant part of its population.
On Friday, data by Markit revealed that the UK manufacturing and services PMIs were better than in January.
The GBP/USD price has also risen because of the recent statement by Andrew Bailey about negative interest rates. He said that the bank would seek to avoid such rates in the near term.
Looking ahead, the British pound will react to the latest UK employment numbers that will come out tomorrow. Economists polled by Reuters expect the data to show that the unemployment rate increased from 5.0% in November to 5.1% in December. They also expect that the average hourly earnings rose from 3.6% to 4.1%.
While these UK jobs numbers are important, they tend to be a bit lagging. That’s because, unlike in the United States, they don’t show the immediate previous month.
GBP/USD technical forecast
The two-hour chart shows that the GBP/USD price reached a multi-year high of 1.4052 on Friday. The chart also shows that the pair had formed several bearish flags and pennant patterns. Further, the pair is slightly above the 25-day and 15-day moving averages. In my view, the current consolidation is primarily because of profit-taking after it reached a key psychological level.
Therefore, the pair will likely rebound higher as bulls start targeting the important resistance at 1.4050. You can take advantage of these movements using a live or demo account from one of these forex and CFD trading brokers.