Title: GBP/USD seesaws around mid-1.2000s amid unimpressive UK employment report

August 16, 2022 02:10 AM ET

By: AnalysisWatch

GBP/USD is hovering around the 1.2050 level as the UK labor market data failed to impress traders in early London trading on Tuesday, and inactivity in the bond markets ahead of the release of the Fed minutes on Wednesday, not to mention mixed concerns about the recession, is also challenging the cable pair's traders.

The latest U.K. labor market report from the Office for National Statistics showed that claimants increased to 10,533,000 in July, up from 32,000 expected and -20,000 prior. In addition, the ILO unemployment rate for the three months to June was in line with expected and previous levels of 3.8%.

It should be noted that the Bank of England (BOE), with its push for higher wages, appears to be pleased with the latest data, suggesting aggressive rate hikes from the "old lady." However, the BOE is already said to be slow to act, so GBP/USD buyers were not pleased with the data.

Aside from the mixed data from the UK, sluggish yields have also troubled GBP/USD traders recently.

However, fears of an economic slowdown and hopes that the Fed will move aggressively despite weaker U.S. inflation seem to be supporting demand for the U.S. dollar as a safe haven, which in turn is making cable buyers hopeful.

Elsewhere, the U.K. political system appears volatile of late, with prime ministerial contenders failing to convince voters that they can freeze energy bills. For example, Labour Party leader Keir Starmer promised that families would "not pay a penny more" for energy bills this winter after unveiling a £29 billion plan (The Guardian). Political uncertainty is also adding to Brexit woes, with no progress on the Northern Ireland deal, keeping GBP/USD buyers at bay.

After the initial reactions to the latest UK labor market report, GBP/USD traders should focus on the risk catalysts related to the recession and UK politics. US building permits, housing starts, and industrial production figures for July will also be important.