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GBP/USD to Target $1.19 off September Private Sector Wage Growth

By:
Bob Mason
Updated: Nov 15, 2022, 15:52 UTC

The GBP/USD is on the move today. September wage growth figures beat forecasts, with private sector wages likely to put the BoE under pressure.

GBP/USD technical analysis - FX Empire

In this article:

It was a busy start to the Tuesday session for the GBP/USD. UK wage growth, claimant counts, and employment figures were in the spotlight.

While employment conditions remain a consideration for the Bank of England, wage growth is a focal point. Fears of entrenched inflation have placed the focus on wages, with a pickup in wage growth likely to force the Bank of England to take more aggressive steps to bring inflation to target.

Average earnings plus bonus rose by 6.0% year-over-year in September versus 6.0% in August. Economists forecast a 5.9% increase.

According to the ONS,

  • Average regular pay growth for the private sector was 6.6% from July to September and 2.2% for the public sector.
  • Outside the peak of the COVID-19 pandemic, this is the largest growth seen for the private sector and the largest difference between the private and public sectors.
  • In September, the number of payroll employees increased by 74,000 and was up 834,000 since pre-pandemic levels.
  • Quarter-on-quarter, the unemployment rate fell by two percentage points to 3.6%.
  • The unemployment rate increased from 3.5% to 3.6% month-on-month.
  • In October, claimant counts increase by 3.3k, following a 3.9k increase in September suggesting another month-on-month increase in October. In August, the UK unemployment rate was 3.5%.

Today, no MPC members are due to speak, leaving the markets to monitor any chatter with the media. The wage growth figures could put the Bank of England under pressure to deliver another sizeable rate hike at the next MPC meeting.

Away from the economic calendar, the UK Government’s Autumn Budget will remain an area of interest. Public borrowing, public spending, and taxation are Government targets. The markets are expecting all the above to fill the hole.

On Sunday, Chancellor Jeremy Hunt reportedly said that everyone would have to make sacrifices though those with the deepest pockets would bear the brunt of it.

GBP/USD Price Action

At the time of writing, the Pound was up 0.39% to $1.17989. A mixed morning saw the GBP/USD fall to an early low of $1.17402 before rising to a high of $1.18082.

GBP/USD on the move.
GBPUSD 151122 Daily Chart

Technical Indicators

The Pound needs to avoid the $1.1764 pivot to target the First Major Resistance Level (R1) at $1.1819 and the Monday high of $1.18289.

In the case of an extended rally, the GBP/USD would likely test the Second Major Resistance Level (R2) at $1.1884 and resistance at $1.19. The Third Major Resistance Level (R3) sits at $1.2003.

A fall through the pivot would bring the First Major Support Level (S1) at $1.1699 in play. However, barring a risk off-fueled sell-off, the Pound would likely avoid sub-$1.16. The Second Major Support Level (S2) at $1.1644 should limit the downside.

The Third Major Support Level (S3) sits at $1.1525.

GBP/USD resistance levels in play.
GBPUSD 151122 1 Hour Chart

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The GBP/USD sits above the 50-day EMA, currently at $1.15909. The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above S1 ($1.1699) would support a breakout from R1 ($1.1819) to target R2 ($1.1884) and $1.19. However, a fall through S1 ($1.1699) would bring S2 ($1.1644) and the 50-day ($1.15909) into view.

EMAs bullish.
GBPUSD 151122 4-Hourly Chart

The US Session

It is a busier day ahead on the US economic calendar, with wholesale inflation and NY Empire State Manufacturing numbers in focus. We expect the wholesale inflation figures to have more influence. Following last week’s CPI report, a spike in wholesale inflation could bring into question the market’s bets of the December Fed pivot.

With the probability of a 75-basis point December rate hike sliding to 19.4%, hawkish Fed chatter could catch the markets by surprise. FOMC member Barr and Fed Governor Cook speak today.

On Sunday, FOMC member Christopher Waller reportedly said that the market focus should be on the “endpoint” of rate hikes and not the pace adding that the Fed is ‘a ways off’ the endpoint.

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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