The GBP/USD pair is seen extending its corrective slide as we head into the European session, despite a risk-friendly market environment amid higher oil prices and steady Chinese GDP figures.
The latest leg lower in the cable can be attributed to stalled USD selling, while anticipation of a weaker UK jobs report also weighs on the sentiment around the GBP. The UK labor market report from the Office for National Statistics (ONS) will be released at 8.30GMT later in the European session ahead.
Jobless claims to increase in September
UK labor market report is expected to show that the number of people seeking jobless benefits to have climbed by 3.0k in the three months to September, compared to a decrease of 2.4k booked in the three months to August.
The unemployment rate is expected to remain at 4.9% during the period. Average weekly earnings, including bonuses, in the three months to Aug are estimated to remain unchanged at 2.3%. While ex-bonuses also the wages are expected to stay flat at 2.1%.
Analysts at Danske Bank note, “The economy has been quite resilient to the Brexit uncertainties so far, hence, we do not expect a big impact on the labor market. The question is whether this will change soon, as we see a risk that business confidence and hence growth may take a hit from Theresa May's harsh stance on Brexit. We estimate the unemployment rate (3M average) and annual growth in average weekly earnings (excluding bonuses) were unchanged at 4.9% and 2.1%, respectively.”
Deviation impact on GBP/USD
Readers can find FX Street's proprietary deviation impact map of the event below. As observed the reaction is likely to remain confined between 20 and 50 pips in deviations up to 2 to -4, although in some cases, if notable enough, a deviation can fuel movements of up to 70 pips.
GBP/USD: Key technical levels to watch on UK data
Franco Shao at ForexCycle, explains, “GBPUSD continued its sideways movement in a range between 1.1946 and 1.2477. Resistance is at 1.2477, as long as this level holds, the sideways movement could be treated as consolidation of the downtrend from 1.3445 (Sept 6 high), another fall to 1.1500 area is still possible after consolidation. On the upside, a break of 1.2477 resistance will indicate that the downward movement had completed at 1.1946 already, then further rally to test the resistance of the downward trend line could be seen.”