How have UK jobs and BoE commentary lifted the pound to a five-week high?

• GBP/USD moves just above 1.3400, reaching its strongest level since mid-September.
• MPC member Greene cautions that pay growth is no longer easing as unemployment drops to 4.7%.
• Wednesday's UK CPI is expected at 3.4%, ahead of BoE Governor Bailey's remarks on Thursday.

GBP/USD reached its strongest level since mid-September as Tuesday's employment figures strengthened the case for an increase in the UK's Bank Rate on 5 November. From around 1.3300, the pair advanced to just above 1.3400 before finishing marginally below that level.

Traders focused on the decline in unemployment to 4.7% in the three months to August, compared with expectations of 4.9%. Pay growth excluding bonuses, meanwhile, increased to 3.7%, a tenth above the forecast. The release also showed an additional 30.3K people claiming unemployment benefits, more than half as much again as the projected 19.4K.

Having voted for a rate increase in September, Bank of England (BoE) Monetary Policy Committee (MPC) member Greene said that the slowdown in pay growth had stalled. In her view, the BoE should move early to prevent higher prices from feeding into wages. Market pricing assigns roughly a 95% probability to an increase in the Bank Rate from 3.75% on 5 November. Such a move would bring it into line with the upper end of the Fed's 3.75%-4.00% range.

Which Releases Could Shape the Rate Decision?

Due at 06:00 GMT on Wednesday, the UK Consumer Price Index (CPI) is expected to rise to 3.4% from 3.1%, while core inflation is forecast at 2.7%, up from 2.6%. Attention then turns to BoE Governor Bailey's speech at 10:50 GMT on Thursday. Friday brings retail sales at 06:00 GMT, with a 0.1% decline anticipated following a 0.5% increase. Each of these three events will inform the 5 November decision.

In the US, Friday's schedule starts with S&P Global's business surveys at 13:45 GMT, followed by University of Michigan sentiment at 14:00 GMT. Sentiment is expected to remain at 46.3. That release will be the last US data before the Fed's decision on 28 October.

What Do the GBP/USD Charts Indicate?

For the first time in more than a month, GBP/USD's advance brought it back to the 200-day Exponential Moving Average (EMA). The 50-day EMA sits below it, near 1.3350. The recovery from the 14 October low just below 1.3150 has now retraced roughly half the decline from August's high just below 1.3700. Daily momentum has entered overbought territory, a condition last seen in late August.

Daily chart of GBP/USD