- GBP / USD has fallen below 1.3800 on Tuesday and has hit fresh one-month lows, despite good UK labor data.
- The drop is mainly due to a stronger US dollar, which is gaining against most of its G10 peers.
The GBP/USD It broke below key support in the form of its 50-day moving average and recently hit lows before the 1.3800 level on Tuesday morning and has been struggling to regain the big figure ever since. Right now, the pair is consolidating at 1.3790, which, to be fair, is a solid 40-pip recovery from the session lows just above 1.3750. Tuesday’s slide means that GBP / USD reached its lowest levels in over a month and the pair is currently trading lower by about 0.5% or around 70 pips on the session.
Performance of the day
The UK news and updates have been taken to the back burner by the broader US dollar rally with the dollar index (DXY) rebounding above 92.00 and hitting new two-week highs. Markets are in a somewhat defensive mood on Tuesday, with global equities and risk-sensitive commodities for the most part down: Germany announced another extension of lockdown measures including heavy restrictions during the period. Easter holiday (as expected) and joins those in France, Italy and other European countries where Covid-19 cases are increasing and lockdown restrictions are tightening. Meanwhile, relations between the United States and China or, more broadly, between the West and China, are in the spotlight and not in a good way, as China responds to sanctions from the United States, the EU, the United Kingdom. and Canada with its own sanctions. All of the above is fueling a more defensive market environment that is helping the USD and hurting the British pound.
On the other hand, strong UK employment data for the months of January and March shows that the UK government’s leave scheme continues to do a good job of protecting jobs; In the three months through January, employment fell 147,000, less than the expected drop of 167,000, and the unemployment rate in January fell to 5.0% versus projections for a small increase to 5.2% from 5.1%.
Meanwhile, the February flash estimate of total employment showed that employment levels fell 2.4% from last year, a drop of 693,000 jobs. It must be taken into account that the presence of the government’s licensing plan continues to distort the labor market data, since many of those who do not work but still on the payrolls of their employees through licenses do not appear as unemployed. As leave is canceled over the summer, unemployment is expected to rise, the question is by how much (current BoE forecasts assume unemployment will rise to 7.5% this year, but it is likely to be revised downward in the next BoE meeting).
Looking ahead, sterling traders have more key data points to watch out for this week, including February consumer price inflation and March preliminary Markit PMIs on Wednesday, followed by retail sales data. February on Friday. Also the Governor of the Bank of England, Andrew Bailey, will speak on Thursday at 09:30 GMT.
Technical levels
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