Anna 
GBP/USD displayed a second consecutive day of positive momentum on Tuesday, yet struggled to fully capitalize on the upward move, remaining below overnight swing highs. Spot prices exhibited minimal change after the release of UK monthly employment data, hovering steadily around 1.2580-1.2585 and marking a gain of over 0.25% for the day.
The Office for National Statistics (ONS) reported a rise in the number of people claiming unemployment benefits by 16,000 in November, falling below expectations of 20,300. Furthermore, the previous month’s figure was revised down from 17,800 to 8,900. Despite these favorable numbers, attention was drawn to a larger-than-expected decline in average revenue in the three months to October. This development has sparked speculation about a potential reversal in the Bank of England’s (BOE) interest rate hike cycle by 2024, becoming a pivotal factor for the performance of the sterling (GBP).
Conversely, the US dollar faced a decline as U.S. Treasury yields experienced a fresh downturn, coupled with expectations that the Federal Reserve will refrain from further interest rate hikes. The overall positive sentiment in equities ahead of the upcoming U.S. consumer inflation data added to the dollar’s diminished safe-haven appeal, further supporting gains for GBP/USD. Nevertheless, traders adopted a cautious stance, preferring to await key central bank events.
The Federal Reserve is set to announce its policy decision on Wednesday at the conclusion of its two-day meeting. Following this, the Bank of England meeting on Thursday is expected to significantly impact GBP, potentially providing substantial impetus to the GBP/USD pair. In the interim, given the mixed fundamental factors, caution is advised to prevent an extension of the recent rebound from the psychological 1.2500 mark or the monthly low reached last Friday.
