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GBP/USD rises after UK wages increase. Gold awaits US inflation data.
 

GBP/USD rises after UK wages increase

GBP/USD is rising, pushing above 12150 after the UK jobs data. Figures showed that unemployment in the UK remained unchanged at 3.7% in the three months to December. However, annual wage inflation, excluding bonuses, jumped to 6.7% up from 6.5%.

The data comes after figures from the CIPD showed that employers were planning the biggest pay rises since 2012 as they struggle to fill vacancies.

The tight labor market and rising wages are fuelling bets that inflation could stay higher for longer and that the Bank of England will need to keep raising interest rates in order to avoid a wage inflation spiral.

The Data comes ahead of UK inflation figures tomorrow, which are expected to show that inflation cooled slightly, but remained in double digits in January.

Attention will now turn to the US inflation data, which is expected to show that consumer price cooled again in January.
 

Where next for GBP/USD?

After finding support on the 200 sma at 1.1960, GBP/USD is grinding higher, attempting to push above the 100 sma at 1.2135 and 50 sma at 1.2185, as it remains caught between the 100 sma on the upside and the 200 sma on the downside. The RSI is just below neutral.

Buyers will look for a rise above the 100 & 50 sma to expose the rising trendline resistance at 1.23, with a break above here bringing 1.2450, the 2023 high, back into play.

On the flip side, sellers could look for a break below 200 sma at 1.1960, also last week’s low. A break below here opens the door to 1.1840, the 2023 low.

(Click on image to enlarge)

Gold awaits US inflation data

Gold fell 0.6% in the previous session extending losses from last week as investors look and is rebounding today as investors remain squarely focused on US CPI data.

CPI has been trending lower over the past few months and is expected to continue that trend in January, falling to 6.2% YoY, down from 6.5% in December. On a monthly basis, inflation is expected to rise 0.5%, up from 0.1%.

After the stellar jobs report, which saw 517k jobs created, investors are wary that the pace at which inflation cools could start to slow.

Signs of stickiness in inflation, particularly core CPI, which is expected to slip to 5.5% from 5.7%, could reinforce the hawkish message from Fed speakers last week, which could weigh on gold.

The markets are now almost fully pricing in a 25 basis point hike in March and also pricing in a 70% probability of another 25 basis point rate hike in May.

Meanwhile, a cooler-than-expected CPI print could ease Fed hiking fears and boost the non-yielding precious metal.
 

Where next for Gold prices?

Gold has so far failed to break meaningfully below the 50 sma, which is needed to extend the reversal from 1959 the 2023 high. Should the bears successfully break below the 50 sma, this could open the door to 1823 the 2023 low, ahead of 1800, the round number, and 100 sma.

On the flipside, should bulls rise with conviction above the 50 sma, 1870 last week’s high becomes the next hurdle ahead of 1900 round number.

(Click on image to enlarge)

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