GBP/USD Rallies Above 1.3100 But Holds Within Broader Range

The US dollar has turned lower following a recovery inspired by Friday’s jobs report. Most of the major currencies are seen advancing against the greenback shortly into the European session with GBP/USD scaling above 1.3100.

Employment data from the UK today revealed the largest quarterly decline in employment in over a decade. The exchange rate, however, did not see much of an impact as the report was mostly in line with expectations.

The office for National Statistics reported that the decline in workers stems mainly from those above 65, the self-employed, and part-time employees.

The UK government implemented support programs for workers when the Coronavirus began to escalate earlier in the year. These programs are set to expire in October, giving the UK some time to further recover.

GBP/USD looks set to post a second consecutive day of gains but whether the pair continues on this momentum may depend on UK GDP data scheduled for release on Wednesday.

Quarterly GDP is expected to have contracted 20.5% last quarter while the monthly version of the report is forecast to show 8.1% growth in June.

GBP/USD is likely to react to this data and volatility is expected. Traders may pay closer attention to the monthly figure to determine the pace at which the economy is recovering.

Technical Analysis

GBP/USD is headed higher, in line with it’s trend in July. However, over the past few weeks, the pair has fallen into a sideways consolidation.

The near-term momentum is to the upside. Considering that the dollar is under pressure once again, buyers are likely to keep the pair bid on dips in the short run.

A potential upside target for the pair falls at 1.3150 which marks the upside of the current range.

To the downside, buyers have shown their presence on dips towards 1.3000. This level is seen as strong support for the week ahead.

Bottom Line

• Sterling traders have brushed off today’s UK employment report in favor of trading a weaker dollar.
• UK GDP data will be released tomorrow and is seen as the highlight in terms of data pertaining to the pair this week.

For a look at all of today’s economic events, check out our economic calendar.