GBP/USD forms bullish flag ahead of UK inflation numbers

The GBP/USD price is rising for the second consecutive day as forex traders react to the impressive UK jobs numbers. They are also focusing on the US bond yields and tomorrow’s UK consumer inflation numbers.

UK jobs numbers

The UK labour market is doing relatively better than other developed countries helped by the government’s furlough program. The unemployment rate declined for the second consecutive month in February this year. It moved from 5.0% in January to 4.9%, which is better than in the United States and the European Union.

The data also showed that more than 73,000 Britons lost their jobs in the three months to February. This was also better than the expected loss of 150,000 and the previous 147,000. Meanwhile, wages without bonuses rose from 4.3% in January to 4.4% in February. Bonus included, wages fell from 4.8% to 4.5%. Still, the economy has lost more than 800,000 jobs since the pandemic started.

The GBP/USD also held steady as the market waits for the latest consumer price index (CPI) data from the UK that will come out on Wednesday morning. Economists polled by Reuters expect the data to show that the headline CPI rose from 0.1% in February to 0.3% in March. This will likely push the year-on-year jump to 0.8%. 

In the same period, analysts see the core CPI rising from -0.5% to 0.3% and on a year-on-year rate of 1.1%. The Office of National Statistics (ONS) will also publish the latest retail price index and producer price index (PPI) data. 

A higher inflation figure will likely be bullish for the GBP/USD because it will signal that the UK economy is recovering at a faster rate than expected. This could mean that the Bank of England (BOE) will move faster than the Fed.

GBP/USD forecast

The hourly chart shows that the GBP/USD rose sharply yesterday as the US dollar sell-off intensified. The pair has formed a bullish flag pattern that is shown in black. This pattern is usually a sign of a bullish continuation. Further, the pair has moved between the 25-period and 15-period exponential moving averages. Therefore, while the pair may pull back to the 23.6% retracement at 1.3930, there is also a possibility that it will resume the upward trend as bulls target the 1.4050 level.