• The British Pound ticks lower against the US Dollar as the latter rises.
  • Investors keenly await the UK labor market and inflation data.
  • Elevated French bond yields have lend support to the US Dollar.

The British Pound (GBP) trades marginally lower at around 1.3314 against the US Dollar (USD) during the European trading session on Monday, but is wobbling inside Friday’s trading range. The GBP/USD pair is expected to remain sideways as investors await key United Kingdom (UK) employment data for quarter ending August and the Consumer Price Index (CPI) data for September, which are scheduled for Tuesday and Wednesday, respectively.

According to estimates, the ILO Unemployment Rate increased to 5% from 4.9% in three months ending July. Average Earnings Including Bonuses drops to 3.8% Year-on-Year (YoY) from the previous reading of 3.9%.

Economists at Deutsche Bank expect UK price pressures to re-accelerate into September, projecting that inflation will “push to its highest rate all year.” They look for headline CPI to rise to “3.49% y-o-y, with core CPI pushing to 2.74% y-o-y.” Within the basket, Deutsche Bank also anticipates a renewed pickup in services, with “Services CPI, we expect, will also rise, picking up pace to 3.71% y-o-y on stronger base effects.”

The UK data will likely have a significant impact on Bank of England’s (BoE) interest rate expectations.

Meanwhile, the US Dollar trades higher as social protests in France amid higher cost of living have boosted borrowing costs for government. 10-year French bond yields holds onto Friday’s gains at around 4.87%.

GBP/USD Technical Analysis

In the daily chart, GBP/USD trades at 1.3317, holding a mildly bullish near-term tone as spot remains above the 20-day exponential moving average (EMA) at 1.3285. The short-term trend bias is underpinned by this nearby dynamic support, while the Relative Strength Index (14) around 51 suggests neutral-to-positive momentum rather than overextension in either direction.

On the downside, initial support is located at the 20-day EMA near 1.3285, while the major support lies at 1.3140. On the upside, the Friday's high at 1.3372 seems the key hurdle for the pair.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Economic Indicator

Consumer Price Index (YoY)

The United Kingdom (UK) Consumer Price Index (CPI), released by the Office for National Statistics on a monthly basis, is a measure of consumer price inflation – the rate at which the prices of goods and services bought by households rise or fall – produced to international standards. It is the inflation measure used in the government’s target. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.

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The Bank of England is tasked with keeping inflation, as measured by the headline Consumer Price Index (CPI) at around 2%, giving the monthly release its importance. An increase in inflation implies a quicker and sooner increase of interest rates or the reduction of bond-buying by the BOE, which means squeezing the supply of pounds. Conversely, a drop in the pace of price rises indicates looser monetary policy. A higher-than-expected result tends to be GBP bullish.

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.