The pound battles for a place under the sun after release of the latest jobs report. British firms increased hiring at a record pace in August, shortly before the end of the government's furlough scheme. Favorable dynamics of the key macroeconomic parameter for the Bank of England's policy is likely to bring the date of the first rate hike closer, which the Central Bank may hint at the upcoming meeting.
The number of employees in UK companies rose by 207K, while unemployment fell 0.1% to 4.5%. The dynamics of employment may allow the Bank of England to be the first among the large Central Banks to raise the interest rate. This is also indicated by inflation, which is now almost double the target level of 2%. The growth rate of wages, which makes a significant contribution to inflation, has slowed down, but remains at an elevated level (6.0%).
The furlough scheme has been discontinued on September 30 and the key question is how negatively this will affect the level of unemployment. At least 1 million Britons have benefited from the program.
The BoE is rumored to make its first tightening step on December meeting. By this time, the pound has a good opportunity to rise on corresponding expectations especially against EUR. However, in regards to performance against USD, the key piece of the puzzle is the tightening path of the Fed, which will likely be clarified at the key November meeting of the Fed.
Considering the GBPUSD technical setup, we can note a positive short-term disposition for the pound and slightly downbeat in the medium term. The chart below shows how the pair bounced from the lower bound of medium-term downtrend (1.345), currently trying to extend its short-term uptrend, with the help of which buyers intend to gain a foothold above 1.36:
As part of the current short-term uptrend, there is a chance to make a short movement to the upper border of the channel with a potential spike to 1.37 area. Positive expectations for the upcoming meeting of the Central Bank should contribute to this.
From a technical point of view, this can also be facilitated by the movement of the dollar to the lower border of the current pattern - a triangle:
Nevertheless, the figure in the dollar indicates high chances of an upside breakout, so one should closely monitor the prospect of the dollar moving above the previous resistance zone - 94.50. From the steep slope of the lower bound of the pattern, we can see some solid bullish pressure of USD buyers which supports the outlook for trend resumption.