Pound faces UK jobs and inflation data amid three-day slide

• GBP/USD hits a four-week low as losses extend into a third consecutive day.
• Stronger-than-expected UK output comes as markets fully price in a December Fed rate rise.
• Tuesday brings UK employment data, followed by October inflation on Wednesday.

Stronger UK growth has failed to prevent a third consecutive daily decline in the Pound against the Dollar, with markets fully pricing in a December Fed rate rise. From a close just below 1.3450 on Monday, GBP/USD has retreated to around 1.3250. The low reached on Thursday marks the pair’s weakest level since 15 October.

Released on 10 November, October’s US inflation figures exceeded expectations. Futures now assign roughly a 90% probability to a quarter-point Fed rate rise on 9 December, with the remaining probability attached to a half-point increase. Speaking on Thursday, Cleveland Fed President Hammack said monetary policy needed to become restrictive, while opposing a half-point rise. At 4.00%, UK Bank Rate matches the upper end of the Fed’s 3.75%-4.00% range. A Fed increase without a corresponding move from the Bank of England (BoE) would therefore take US rates above those in the UK.

Third-quarter UK Gross Domestic Product (GDP) growth accelerated from 0.5% to 0.7%, in line with expectations, while September’s 0.2% increase surpassed a forecast for no growth. Of the five UK releases on Thursday, three exceeded forecasts and two met them, yet GBP/USD subsequently reached a four-week low. An 8-1 vote on 5 November took the BoE’s rate to 4.00%, with the sole dissenter favouring a half-point increase. Markets price in a probability of nearly 80% for a second rise on 17 December.

UK jobs and inflation lead the data calendar

At 07:00 GMT on Tuesday, 17 November, the UK releases employment figures, following previous readings of 4.7% for unemployment and 3.7% for pay growth excluding bonuses. The next day, Wednesday, 18 November, October inflation is due at 07:00 GMT, following September’s 3.5% reading. Both releases precede the BoE’s decision on 17 December.

Friday’s US producer price figures for October are scheduled for 13:30 GMT. The core monthly increase is forecast at 0.3%, down from 0.7%. At 19:00 GMT on Wednesday, 18 November, minutes from the Fed’s October meeting will provide further insight into whether the 9 December rate rise will be a quarter-point or a half-point.

GBP/USD retreats into its earlier trading range

Around three-quarters of the advance from the 14 October low near 1.3150 to the 1.3500 highs on 4 and 5 November has been erased by the three-day decline. GBP/USD is also back within the 1.3200-1.3300 range that contained trading from late September to mid-October. Over the past six sessions, Monday’s rebound was the sole daily gain.

Daily chart for GBP/USD