GBP/USD Heads Near Two Week Lows Ahead of Wednesdays’ UK Inflation Data

Investors rightfully brushed off a report today that showed the UK employment rate rising to a record high and sold off the British pound on the back of a strong dollar and ahead of tomorrow’s UK CPI data.

Employment data released from the UK today, while a stellar report, reflects data ahead of the Coronavirus escalation and is not a good indication of where the economy stands today. Nevertheless, strength in the job markets over the past few readings does put the UK in a better position to handle the negative economic consequences of the virus.

Tomorrows UK inflation data report is seen as a more relevant data point as it measures fluctuations in prices up to the end of March. The median analyst forecast is for a rise of 1.5% in the consumer price index for the year to March which is a few ticks lower than the last reading of 1.7%.

It should be a volatile week for the British pound. Aside from Wednesday’s inflation data, survey data from purchase managers in the manufacturing and services industries are set for release on Thursday. This data will be released both from the UK and the US. Then, on Friday, retail sales figures will be released from the UK.

Technical Analysis

GBP/USD is approaching support at 1.2311 which stands to hold the pair higher going into the string of important data releases for the UK that begin tomorrow.

However, unless the upcoming data surprises to the upside, we could see a fairly sharp fall in the British pound this week. A sustained drop below 1.2311 shows the next near-term target at 1.2200.

To the upside, 1.2349 acted as range support in the early week and is seen as resistance for the session ahead.

Bottom Line

• GBP/USD traders ignored today’s UK employment data as it reflected a period ahead of the Coronavirus escalation.
• There are important UK data releases scheduled for each remaining day this week. Volatility is expected.