Pound Sterling aims sustainable break above 1.2900 as domestic wage pressures remain resilient

• Pound Sterling has attracted significant bets as chances of more fat rate hikes from the Bank of England solidify.
• United Kingdom firms are offering higher payroll charges to offset labor shortages.
• Britain’s jobless rate has jumped to 4% and the Claimant Count Change has added fresh 25.7K job seekers.

The Pound Sterling (GBP) has delivered a north-side vertical move marginally above the round-level resistance of 1.2900 as labor cost data has turned out more resilient than expected. The GBP/USD pair has picked immense strength as chances of a bulky interest rate hike from the Bank of England (BoE) have escalated, knowing the fact, that higher disposable income available to households will result in higher purchasing power, and eventually the overall demand will elevate further.

United Kingdom firms are offering higher wages to attract fresh talent amid labor shortages. Scrutiny of the Employment data indicates that the jobless rate has increased as firms have started avoiding credit due to higher interest rate attachment. It seems that the chances of a fat rate hike by the BoE will remain elevated as higher wage pressures are sufficient to offset the impact of a rise in the Unemployment Rate.

Daily Digest Market Movers: Pound Sterling capitalizes upbeat labor data

• Pound Sterling attempts a break above 1.2900 United Kingdom labor cost has turned out hotter than expected.
• Three-month Average Earnings excluding bonuses have remained steady at 7.3% while investors were anticipating a decline to 7.1%.
• Claimant Count Change has jumped to 25.7K while there was a decline of 22.5K claims last month. Three-month Unemployment Rate has increased to 4.0% vs. the expectations and the former release of 3.8%.
• Higher wage pressures are sufficient to offset a significant rise in the jobless rate.
• Market participants are expecting that the interest rates by the Bank of England would peak at 6.25-6.50%.
• BoE Governor Andrew Bailey conveyed on Monday that the central bank will keep the job market under observation in an attempt to bring down inflation.
• Andrew Bailey reiterated that the central bank is making efforts to provide an environment of price stability.
• United Kingdom FM Jeremy Hunt cited on Monday that the government and the central bank "will do what is necessary, for as long as necessary" to return inflation to its 2% target.
• Inflation in Britain's economy has softened from its peak of 11.1%, however, the promise made by UK PM Rishi Sunak that inflationary pressures would halve by year-end would be missed.
• A survey from British Retail Consortium (BRC) showed that higher food prices have squeezed the budgets of households, which has eased demand for big-ticket items.
• Households are facing the burden of high price pressures as the pace of inflation is higher than the velocity of labor costs.
• Last week, Andrew Bailey urged industry regulators to stop overcharging customers for fuel.
• This week, UK’s economic calendar is full of events as the labor market data will be followed by Wednesday’s Financial Policy Committee (FPC) minutes, and Thursday’s Industrial and Manufacturing data (May).
• Monthly Industrial Production and Gross Domestic Product (GDP) are expected to contract by 0.4%. And Manufacturing Production is seen contracting by 0.5%.
• Market sentiment is quite bullish amid an upbeat appeal for risk-sensitive currencies.
• The US Dollar Index (DXY) has extended its three-day losing spell as investors are hoping only one interest rate hike has left in the toolkit of the Federal Reserve (Fed).
• Cleveland Fed President Loretta Mester, in a speech at the University of San Diego, cited that “The economy has shown more underlying strength than anticipated earlier this year, and inflation has remained stubbornly high, with progress on core inflation stalling,” as reported by Reuters.
• This week, the United States Consumer Price Index (CPI) will be keenly watched. As per the preliminary report, monthly headline CPI delivered a higher pace of 0.3% vs. the former pace of 0.1%. Also, core inflation that excludes oil and food prices is expected to match the headline CPI pace.

Technical Analysis: Pound Sterling aims to sustain above 1.2900

Pound Sterling has continued its three-day winning streak after overstepping Monday’s high at 1.2868. The Cable is approaching the Rising Channel chart pattern formed on a daily period in which each pullback is considered a buying opportunity for investors. Upward-sloping 50-and 200-period daily Exponential Moving Averages (DEMAs) indicate that the overall trend is extremely bullish. Bounded oscillators are demonstrating strength in the upside momentum.