August 30, 2022 12:25 AM ET
The GBP/USD pair has broken upwards from the consolidation formed in a narrow range of 1.1687-1.1697 and is aiming to hold above the immediate 1.1700 barrier. Cable has moved sideways after a significant pullback from Monday's low of 1.1650. The asset is expected to continue its slump as investors hold off ahead of Friday's U.S. nonfarm payrolls (NFP) report.
The market consensus is that the U.S. economy added 290,000 jobs in August, up from 528,000 previously. It is worth noting that the U.S. jobs data has yet to disappoint Fed policymakers. Even at this time, the NFP could continue its upward cycle. Furthermore, investors should not view the decline in job creation as a major problem. The U.S. economy has been operating at full employment for about six months; therefore, the margin for job creation has been significantly reduced.
Investors will also pay attention to average hourly earnings, which are expected to rise 10 basis points (bps) to 5.3 percent. While price pressures are advancing dramatically, earnings have remained weak. As a result, households are facing headwinds amid rising payments for inflation-adjusted goods and services.
Insufficient growth in household incomes to offset rising payments could affect sentiment among market participants.
In the U.K., soaring electricity and energy prices are unsettling policymakers at the Bank of England. The UK economy is facing multiple headwinds, such as political instability after the resignation of Prime Minister Boris Johnson, the energy supply crisis and higher projections for the inflation rate.