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GBP/USD witnesses pullback to 1.2900 before UK employment report

  • The GBP/USD pair trades around 1.2900 heading towards European session on Tuesday.
  • Recent negatives from the UK politics triggered the pair’s pullback.
  • Monthly employment report and developments on the US-China trade deal with full markets will be key to observe.

The British Pound (GBP) witnesses pullback to 1.2900 against the US Dollar ahead of European sessions on Tuesday. The pair recently declined to 1.2925 to the day’s low after news revealed that seven politicians quit opposition Labour Party and the UK manufacturers warn of ‘catastrophic’ no-deal Brexit. Coming up in the Pound traders’ radar will be the December month unemployment rate and average earnings index 3m/y, coupled with claimant count change for January.

Political turmoil in the UK took another turn as Reuters reported seven members of the opposition Labour Party quit in protest to Jeremy Corbyn’s leadership. Adding to the pessimism was British manufacturers’ warning of 'catastrophic' no-deal Brexit, as revealed by the survey concerning Make UK, the country’s main manufacturing association.

Looking forward, monthly details of the UK employment report will be key to determine near-term GBP/USD moves. The forecasts suggest no change in December month unemployment rate of 4.0% while average earnings including bonus (3Mo/Yr) are expected to increase to 3.5% from 3.4% during the same month. Also, the January month claimant count change could soften to 2.4K from 20.8K.

It should also be noted that the UK PM Theresa May is on EU round for her last ditched efforts to convince EU leaders for Brexit proposal as she is determined to put the progress on parliament on February 26.

On the other hand, the US markets will be open after the President’s Day holiday on Monday. Investors will be focusing on the US-China trade developments as White House delegates returned home after Beijing talks on Friday. The committee including few top-notch decision-makers, namely the US Trade Representative Lighthizer and the Treasury Sec. Mnuchin, will discuss what should be needed to push China further towards a deal before the Chinese Vice Premier Liu He arrives in Washington on February 21st and 22nd to continue the trade negotiations.

While likely improvement in average earnings and soft claimant change may help the GBP recover some of its latest losses, uncertainty surrounding Brexit can continue challenging the Pound buyers. It should also be noted that reports likely hindering the US-China trade deal might also favor the pair’s upside.

GBP/USD Technical Analysis

On a break of 1.2890, the GBP/USD pair may dip to 1.2860 and then to 1.2835 whereas 1.2770 can confine the pair’s declines then after.

Meanwhile, 1.2920 and 1.2940 can offer nearby resistances to the prices ahead of highlighting 1.2980 and 1.3000 on buyers’ radar.