GBP/USD approaches 1-month high but remains below 1.2300

• GBP/USD regains positive traction on Tuesday following the release of the UK jobs report.
• Stronger data on wage growth could force the Bank of England to make further hikes and boost sterling.
• A combination of factors continues to support the dollar and keep any further advance limited.

The GBP/USD pair attracts new buying near the 1.2170-1.2165 zone on Tuesday and approaches the one-month high of 1.2289 reached the day before reaching an intraday top at 1.2272. However, the pair pared some of its intraday gains and fell back below the 1.2250 zone during the early hours of the North American session.

The British pound strengthens a bit after the release of the UK monthly jobs data, which in turn boosts the GBP/USD pair. The UK’s Office for National Statistics (ONS) reported that median earnings, including and excluding bonuses, rose 6.4% in the September-November period. In addition, the number of people applying for unemployment benefits fell to 19,700 in December, from 30,500 previously, and the unemployment rate remained at 3.7%, near its lowest level in almost 50 years. This could add to the pressure on the Bank of England to raise interest rates another 50 basis points at the next policy meeting, giving the national currency a slight boost.

Elsewhere, the US dollar struggles to hold on to its modest intraday gains and offers additional support to GBP/USD. That being said, a combination of factors continues to act as a tailwind for the dollar, holding off any further advances for the dollar, at least for the time being. A good intraday rally in US Treasury Yields, coupled with a generally weaker tone around equity markets, should limit the fall in the safe-haven dollar. This, in turn, makes it prudent to wait for strong follow-on buying beyond 1.2300 before traders begin to position for an extension of the pair’s recent rally seen over the last week and a half or so.

Technical levels to follow