British Pound: Range Highs Against US Dollar in Sight on Bullish Flag Signal – Scotiabank

UK unemployment fell to 4.7%, against expectations of 4.9%. Scotiabank strategists Shaun Osborne and Eric Theoret view the stronger-than-expected UK labour figures as supportive of the British Pound (GBP). Earnings excluding bonuses increased 3.7%, adding to expectations of Bank of England (BoE) tightening. Following a strong bullish weekly reversal, a potential bull flag on the short-term GBP/USD chart points to room for further gains, according to the strategists.

4.7% unemployment supports bullish GBP structure

"UK data for August showed Unemployment of 4.7%, below forecasts of 4.9%, while Average Hourly Earnings data were in line with (or slightly above) expectations. Earnings ex-bonuses rose 3.7% in the 3m through August, above calls for a 3.6% gain."

"The data reinforced BoE tightening expectations and gave the GBP a modest lift on the day. The BoE’s Megan Greene speaks at 13ET. In recent remarks, Greene has focused on the risk of second round effects emerging in price trends, suggesting the Bank should “proactively” lean against them."

"Greene, alongside Pill and Mann have supported tightener policy since the summer and look set to get their wish at the November 5th MPC. "

"Bullish – The GBP is consolidating gains on the short-term chart via a potential bull flag pattern. That development keeps our focus on the risk of gains extending quite significantly in the short run after the solid GBP rise from last Wednesday’s post-US CPI low drove a huge bullish weekly reversal on the chart (outside range week)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)