15.11.202116:07 Forex Analysis & Reviews: UK labor market, inflation, and retail sales data to clarify the fate of GBPUSD

A busy economic calendar for the week of November 19 may help the British pound to find its ground or, on the contrary, send it to conquer uncharted depths. After the rapid sell-off caused by the reluctance of the Bank of England to raise the repo rate and the impressive rise in US inflation, the GBPUSD pair needs fresh drivers. Why not find it in macroeconomic statistics?

According to Bloomberg polls, inflation in the UK in October accelerated from 3.1% to 3.8%, which is the highest level in a decade. This is due to supply chain disruptions, limited labor market supply, and the energy crisis. Nomura expects consumer prices to continue to accelerate to 4.5% in November and 5% in the spring of 2022, in line with Bank of England forecasts. Unsurprisingly, in such an environment, money markets are starting to raise the chances of a monetary tightening by the BoE, which plummeted after the central bank refused to raise the repo rate. Investors predict it will grow by 115 basis points over the next 12 months.

Inflation dynamics in Britain

Dynamics of expected changes in the repo rate

At the same time, the money markets believe that after a series of increases in borrowing costs, the Bank of England will be forced to reduce them, which will result in the fall of the repo rate to 1% over the next three years. BoE Governor Andrew Bailey called the market signals overly aggressive, but traders seem to have learned nothing from the fake BoE. They continue to bet on the start of the monetary restriction cycle.

Bailey noted that the only reason the Committee did not raise borrowing costs was a lack of information. BoE would like to see statistics on the UK labor market, and on the 16th, they will finally receive it. According to Bloomberg experts' forecasts, unemployment will fall from 4.5% to 4.4%, and the average salary will slow down from 8.3% to 5.6%. I believe that it is the dynamics of the latter indicator that arouses the concerns of the Bank of England. If it continued to accelerate, it would give a new impetus to inflation and further exacerbate the worries of the regulator.

Following the data on employment and consumer prices, investors expect the statistics on retail sales, which, after 6 months of contraction on a monthly basis, should finally please with a plus. However, this is unlikely to help a struggling economy. It is facing a steam-shedding recovery and is still 1.8% less than before the pandemic. Add to this the reanimation of the Brexit topic, and doubts that the GBPUSD quotes may fall even lower will completely disappear.

Let's not forget that there are always two currencies in any pair, and the strong position of the US dollar will be a serious problem for the GBPUSD bulls. Unless, of course, the "bears" start fixing profit on shorts.

Technically, a Three-Drive (1-2-3) pattern has formed on the daily chart of GBPUSD. At the same time, the return of quotes above the high of the second (2) near 1.351 is a reason for short-term purchases. While the pair is holding below the important level, the focus should be on selling in the direction of 1.325.

GBPUSD, Daily chart