GBP/USD forecast ahead of UK jobs and inflation data
- The GBP/USD pair was little changed on Monday morning.
- The pair will react to the latest UK consumer inflation data scheduled for Wednesday.
- The UK will also publish the latest employment numbers on Tuesday.
The GBP/USD is in a tight range ahead of the key UK employment and inflation data scheduled for this week. The pair is trading at 1.3835, which is below last week’s high of 1.3895.
UK inflation set to rise
Inflation, both from the UK and the US, will be the main mover of the GBP/USD pair this week. First, the US will publish its official CPI numbers on Tuesday. Economists believe that the country’s inflation declined modestly from 5.4% in July to 5.3% in August. They also see the core CPI falling slightly to about 4.3%, which is significantly above the Fed’s target of 2.0%.
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The Office of National Statistics (ONS) will then publish the latest UK inflation data. Economists expect the data to show that the country’s CPI rose to 2.9% in August, a sharp increase from the previous 2%.
This sharp increase will be because of the base effects of Rishi Sunak’s “Eat Out to Help Out” scheme. The scheme saw people in the UK get 50% off from restaurants three days per week. The Bank of England (BOE) expects that the country’s CPI will rise to 4% in the fourth quarter.
The core CPI, which excludes the volatile food and energy prices, is expected to rise from 1.9% to 2.9% on a year-on-year basis. The data will decline from 0.5% to 0.4% on a month-on-month basis.
UK jobs numbers
The GBP/USD will also react to the latest UK employment numbers that will come out on Tuesday. The data is expected to show that the UK unemployment rate declined from 4.7% in June to 4.6% in July. At the same time, wages with bonuses are expected to drop from 8.8% to 8.2%. Without bonuses, they are expected to drop to 6.8%.
The UK labour market is expected to show some modest weakness in the upcoming months as the government winds down the furlough program. In a note, Marc Chandler of Marc to Markets said:
“The $1.3900 area has proved formidable, and cable has not moved above it in a month. Even if it were to break, the proximity of the more important cap at $1.40 would keep momentum traders cautious. Despite a poor July GDP report ahead of the weekend, initial support around $1.3825 held.”
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