The Pound Sterling surged on Tuesday, surpassing the 1.2800 level, driven by unexpectedly strong UK labor market data. The unemployment rate fell to 4.2%, defying expectations of an increase, while average earnings grew faster than anticipated. These figures have dampened expectations of imminent interest rate cuts by the Bank of England.
BoE policymaker Catherine Mann’s recent comments on persistent inflation have further supported the Pound. However, the currency’s trajectory remains dependent on the upcoming UK CPI data, which is expected to show a continued decline in core inflation.
USD Weakened by Improving Risk Sentiment
The US Dollar experienced a modest decline as improving risk sentiment weighed on its safe-haven appeal. While the upcoming US CPI data will be closely watched, market expectations for aggressive Federal Reserve rate cuts have moderated due to easing recession fears.
Technical Outlook for GBP/USD
The GBP/USD pair has formed a positive divergence on the daily chart, suggesting a potential uptrend. The 20-day EMA is acting as immediate resistance. A decisive break above this level could open the way for further gains towards 1.2840 and 1.2900. However, a failure to hold above the 20-day EMA could lead to a retest of lower support levels.
