Unemployment Rises

 GBP has seen plenty of volatility over the European open on Tuesday as traders digest the latest UK jobs data. The unemployment rate was seen increasing to 3.9% from 3.8% prior while the claimant count change was seen rising to 46.7k from 28.2k prior, well above the 31.2k the market was looking for. The average earnings index was seen holding steady at 5.8%.

 Payrolls Fall

 The data was significant in that it marked the first time in two years that the number of workers on UK payrolls dropped. The ONS noted that 136k employees dropped off the payrolls between March and April in a worrying sign for the health of the UK economy. Recession fears in the UK have been a key focus point recently as the country continues to battle the cost-of-living crisis and the fallout from Brexit.

 Banks Turning Bullish on GBP

 Despite the generally negative data, the roughly 0.5% drop in GBPUSD was quickly bought into the lows, sending the pair higher. There seems to have been a bit of a shift in market sentiment towards GBP recently. Both Citi and Goldman have issued bullish forecasts for the Pound. In its forecast, Goldman cites the passing of high energy and prices as a key driver behind the improved outlook for GBP. Additionally, with inflation forecasts having risen, the bank anticipates a more sustained tightening campaign from the BOE which should also help drive GBP higher against currencies where central banks have (or are expected to) eased off tightening.

 Technical Views 

 GBPUSD

 For now, the correction lower in GBPUSD has seen the market holding above the 1.2437 level, sitting just under the bull channel top. While this support area holds, the focus is on a further push higher with a break of 1.2659 the goal for bulls, targeting 1.2992 above.