UK jobs preview: What to expect of GBP/USD?

The GBP/USD pair is seen hovering close to daily lows struck near 1.2330 region, as the bulls continue to consolidate 4 big figures UK May & Trump-led rally.

Focus now remains on the UK labor market report due to be published by the Office for National Statistics (ONS) 9.30GMT later in the European session ahead.

Jobless claims to increase last month

UK labor market report is expected to show that the number of people seeking jobless benefits to have climbed by 3.7k in the three months to December, compared to an increase of 2.4k booked in the three months to November.

The unemployment rate is expected to tick higher to 4.9% during the period from 4.8% last.  Average weekly earnings, including bonuses, in the three months to Nov are estimated to remain to increase 2.6%. While ex-bonuses also the wages are expected to stay flat at 2.6%.

Analysts at Danske Bank note, “While we have noticed small signs that the labour market recovery is on pause, the impact of Brexit uncertainties has so far been quite modest. We estimate the unemployment rate (3M average) was unchanged at 4.8% but that average weekly earnings (3M average) fell to 2.5% y/y (from 2.6%).”

Deviation impact on GBP/USD

Readers can find FX Street's proprietary deviation impact map of the event below. As observed the reaction is likely to remain confined between 20 and 60 pips in deviations up to 2 to -4, although in some cases, if notable enough, a deviation can fuel movements of up to 85 pips.

GBP/USD: Key technical levels to watch on UK data

Haresh Menghani, Analyst at FXStreet noted, “A weaker UK employment data could drag the pair back towards 1.2200 handle. A convincing break back below 1.2200 handle would validate Tuesday's strong recovery move as a 'Dead cat bounce' and negate possibilities of any further near-term recovery.”

“Alternatively, sustained move back above 1.2400 strong hurdle (50-day SMA) now seems to assist the pair to reclaim 1.2500 psychological mark and head towards testing 38.2% Fibonacci retracement level resistance near 1.2535-40 region. Intermediate resistance, ahead of 1.2500 mark, is pegged near 1.2480-85 region.”