Forex Market: GBP/USD consolidates after Friday’s losses as markets await UK unemployment, GDP data

Having registered its largest single-day loss since June 24th on Friday, GBP/USD was rather in consolidation mode during the European session on Monday ahead of the key UK unemployment and GDP data prints later this week.

The US Dollar regained strength against its major peers on Friday after the latest report by the US Labor Department showed a faster-than-expected job growth in July, which, to a certain extent, allayed investor concerns over the country’s labor market.

On the other hand, uncertainty over the next US fiscal support package to address the impact from the COVID-19 pandemic continued to persist, while limiting dollar gains.

The latest CFTC data showed speculators’ net shorts on the Pound had decreased during the week to August 4th. Still, however, the British currency remained at a sizable distance below last week’s five-month high against the US Dollar, which it registered after a less pessimistic statement on economy by Bank of England.

“Speculators are still short GBP and while a short squeeze is still possible, we prefer not to chase the story of upside surprises in UK activity nor a stronger GBP,” ING analysts wrote in an investor note.

A consensus of analyst estimates points to a surge in UK unemployment to 4.2% during the three months to June, up from 3.9% in the three-month period to May.

“GBP could not hold on to last Thursday’s BoE-inspired gains and instead is consolidating ahead of key employment data released tomorrow,” ING analysts noted.

As of 11:15 GMT on Monday GBP/USD was edging down 0.17% to trade at 1.3026, while moving within a daily range of 1.3019-1.3087. The major pair advanced 5.52% in July, while marking a second straight month of gains and its best monthly performance since May 2009. The pair lost 0.22% during the first week of August.

On today’s economic calendar, the number of job openings in the United States probably decreased to 4.910 million in June, according to market expectations, from 5.397 million in May. The latest figure reflected only a limited resumption of economic activity that had been cut down in March and April because of the pandemic. The official report is due out at 14:00 GMT.

Bond Yield Spread

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, equaled 17.1 basis points (0.171%) as of 10:15 GMT on Monday, up from 14.6 basis points on August 7th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 1.3072
R1 – 1.3134
R2 – 1.3217
R3 – 1.3279
R4 – 1.3341

S1 – 1.2990
S2 – 1.2928
S3 – 1.2845
S4 – 1.2763