• GBP/USD remains sidelined after a volatile day, grinds higher of late.
• Mostly upbeat UK jobs report, hopes of British government-labor deal underpin bullish bias for the Cable.
• Unimpressive US inflation, retreat in Treasury bond yields add to the upside expectations.
• UK CPI for February eyed for intraday directions, US data appears important too.

GBP/USD portrays the pre-data anxiety by treading water around 1.2180 during early Wednesday.

The Cable pair rose to the two-week high the previous day before reversing from 1.2270 as the US inflation propelled market moves. Even so, upbeat UK employment data joined hopes of overcoming the British workers’ strikes seemed to have put a floor under the GBP/USD prices.

Late Tuesday, the Financial Times (FT) quoted officials familiar with the matter to mention that UK Prime Minister Rishi Sunak and Finance Minister Jeremy Hunt are mulling giving NHS staff and other key workers a lump sum payment by backdating next year's pay award, which takes effect from April, likely to the start of January 2023.

Before that, the UK Office for National Statistics (ONS) released mixed employment numbers with an unchanged ILO Unemployment Rate of 3.7% for three months to December contrasting with a decline in the Claimant Count Change, to -12.9K versus -3.2K prior. The details suggested an increase in Average Earnings Excluding Bonuses and a number of payrolled employees versus a fall in the UK vacancies. The mixed data, however, managed to help the British Pound (GBP) on release.

On the other hand, the US US Consumer Price Index (CPI) rose past market expectations to 6.4% YoY but posted the slowest increase since 2021 while easing below 6.5% prior. Following the data, Dallas Fed President Lorie Logan stated that they must remain prepared to continue rate increases for a longer period than previously anticipated. On the same line was New York Fed President John Williams who noted that the work to control too high inflation is not yet done. Additionally, Philadelphia Fed President Patrick Harker signaled that they are not done (with lifting rates), but they are likely close.

Against this backdrop, US 10-year Treasury bond yields seesaw around 3.75%, after rising three basis points (bps) to refresh a six-week high whereas the two-year counterpart jumped to the highest level since early November 2022 by poking 4.62%, around 4.61% at the latest. Further, S&P 500 Futures trace Wall Street’s downbeat closing to highlight the mildly offbeat mood.

Looking forward, the UK CPI for January, expected to ease to 10.3% YoY versus 10.5% prior, becomes crucial for the GBP/USD traders amid hopes that the Bank of England (BoE) has limited scope for further rate hikes. Following that, US Retail Sales and Industrial Production details for January, as well as NY Empire State Manufacturing Index for February, should be watched closely for clear directions.

Also read: UK Inflation Preview: Will softer CPI raise odds of a BoE pause?

Technical analysis

A successful break of the 50-DMA, around 1.2190 by the press time, becomes necessary for the GBP/USD buyers to keep the reins.