UK jobs and earnings data boost Pound (GBP/USD, GBP/JPY) amid BoE inflation projections, with GBP/USD surging within a trading range.
In a week marked by a flurry of UK economic data, the Pound Sterling (GBP) saw significant gains against major currencies, notably the US Dollar (USD) and the Japanese Yen (JPY). As employment and earnings figures painted a positive picture for the British economy, traders responded by boosting GBP/USD and GBP/JPY pairs.
Employment and Earnings Data Impact BoE Inflation Outlook
The latest employment data for the UK, released in December, showcased steady job numbers growth following robust increases in the preceding months. Despite this positive momentum, the Office for National Statistics (ONS) issued a cautionary note regarding the interpretation of short-term fluctuations due to a reweighting of the Labour Force Survey, which could lead to continued volatility in future reports.
Although average earnings figures slightly dipped compared to previous readings, they surpassed market estimates, indicating potential resilience in wage growth. The Bank of England (BoE) projected a rise in average earnings to approximately 4.25% by the end of the year. However, achieving the BoE’s inflation target of 2% by the second half of the year may necessitate further softening in the job market and sustained improvement in earnings data.
Sterling on Strong UK Data – GBP/USD, GBP/JPY on the Rise
Sterling Surges Amidst UK Data Onslaught
GBP/USD experienced an upswing following the release of employment and earnings data, propelling the pair back into a familiar trading range. Despite attempts to break below the established range earlier in the year, GBP/USD lacked the necessary momentum, ultimately rebounding above the 200-day simple moving average.
With additional data releases on UK inflation and GDP scheduled for the week, sterling could face heightened volatility. Forecasts anticipate a slight uptick in CPI, while concerns loom over a possible technical recession in the UK’s economy during the final quarter of the previous year. Nonetheless, preliminary data revisions could mitigate the impact of a minor contraction, potentially limiting adverse effects on the Pound.
GBP/JPY Targets Key Resistance Level
GBP/JPY surged following the release of employment and earnings data, breaching the significant resistance level at 188.80. The Japanese Yen’s depreciation throughout the year and the Bank of Japan’s cautious approach to policy adjustments contributed to the pair’s upward momentum. However, potential headwinds could emerge if the Japanese Finance Ministry expresses dissatisfaction with the yen’s recent weakness, posing a risk to further gains.
As economic indicators continue to shape market sentiment, traders remain attentive to developments in both domestic and global economies, particularly amid ongoing uncertainties surrounding the COVID-19 pandemic and geopolitical tensions.