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GBP/USD outlook: UK jobs and inflation data on deck

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Brace for GBP/USD volatility this week as the market awaits the latest unemployment and CPI print. Both readings could give investors further clues on what the Bank of England will do at its February meeting.


 Angeline Ong | Financial Analyst, Presenter and Content Editor, London | Publication date: 

(Video summary)

This week, traders are focusing on the British pound, also known as the sterling, as there are important economic indicators coming out that could give us more information about what the Bank of England (BoE) will do next. One of these indicators is the unemployment rate, which is expected to increase to 4.3% in November. This would be the first time it has gone up in five months. Currently, the rate is at 4.2%, which is the highest it has been since September of last year.


Another indicator to watch is the Consumer Price Index (CPI) growth, which measures inflation. It is expected to slow down to 3.8% in December compared to the previous month. This is good news because inflation has been high lately, but it has been gradually decreasing since reaching a peak of 11.1% in October of 2022. In addition, the core CPI growth, which excludes volatile items like food and energy, is forecasted to fall to 4.9% compared to the previous year. This would be the lowest level since January of 2022.

Retail sales

Lastly, on Friday we will get data on retail sales in December, which is estimated to decline by 0.5%. This means that people were spending less on goods during the holiday season. All of these indicators will be closely watched by Andrew Bailey and his team at the BoE, as they will decide on interest rates on February 1st. This decision will give us a good idea of how the UK economy is doing.

Overall, the UK economy has been weak recently, with inflation coming down but still remaining high. The property market is uncertain, but there are signs that it is stabilizing after a slow period. The GBP/USD exchange rate, also known as "cable," has been quite volatile since October but has been gradually moving towards the 12,743 mark. If it breaks through that level, it could potentially go up to around 13,140. So, the upcoming economic indicators and the Bank of England's interest rate decision will help us understand how the UK economy is performing and what the sterling's movements are likely to be.



This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.


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