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GBP/USD: despite the strong report on the labor market

15 February 2022, 12:09

Yuri Papshev

Despite the strong report on the labor market, the British pound reacted rather reservedly to this publication. Probably, investors are waiting for the release of the inflation report on Wednesday (07:00 GMT) in order to start correcting their positions on the pound.

The consumer price index (CPI) reflects the dynamics of retail prices for a group of goods and services included in the consumer basket, being a key indicator of inflation.

In the previous reporting month (December), the growth in consumer inflation amounted to +0.5% (+5.4% in annual terms). The data suggests growing inflationary pressures, which is likely to support the pound. A reading of the indicator below the forecast/previous value could provoke a weakening of the pound, as low inflation will force the Bank of England to maintain an easy monetary policy. Forecast for January: -0.4% (+5.4% in annual terms).

Also on Wednesday (at 19:00 GMT) the minutes from the January Fed meeting (“FOMC minutes”) will be published. At the end of the January meeting, Fed leaders confirmed the decision to accelerate the reduction in asset purchases in order to complete the QE program in March 2022 and begin raising interest rates. Fed officials plan to raise interest rates three times in 2022.