GBP/USD sits near 15-month top, comfortably above mid-1.2800s ahead of UK jobs data

• GBP/USD touches a fresh 15-month peak on Tuesday and is supported by a combination of factors.
• Expectations that the Fed will soften its hawkish stance weigh on the USD and lend some support.
• Bets for more aggressive tightening by the BoE act as a tailwind ahead of the key UK jobs report.

The GBP/USD pair trades with a positive bias for the fourth successive day on Tuesday and climbs to the 1.2875 region, or a fresh high since April 2022 during the Asian session.

The US Dollar (USD) prolongs its downtrend witnessed over the past week or so and drops to a nearly three-week low, which turns out to be a key factor acting as a tailwind for the GBP/USD pair. Two Fed officials said Monday that the end to the current monetary policy tightening cycle is getting close. This led to the overnight downfall in the US Treasury bond yields and keeps the USD bulls on the defensive. The British Pound (GBP), on the other hand, remains well supported by expectations that the Bank of England (BoE) will be far more aggressive in policy tightening to combat high inflation.

In fact, the markets are currently pricing in the possibility of a further 130 bps of tightening by the BoE through to the turn of the year. Moreover, BoE Governor Andrew Bailey noted on Monday that inflation is unacceptably high and the aim is to bring it down to the 2% target. Bailey added that headline inflation is expected to decrease significantly over the rest of the year, though both price and wage increases at current rates are inconsistent with the inflation target. This lends additional support to the GBP/USD pair ahead of the release of the UK monthly employment details.

The market focus will remain glued to wage growth data, which is expected to show that Average Earnings including bonuses rose to 6.8% during the three months to May from the 6.5% previous. Apart from any major disappointment, the crucial jobs report might continue to underpin the Sterling Pound (GBP). In the absence of any relevant market-moving economic data from the US, the aforementioned fundamental backdrop suggests that the path of least resistance for the GBP/USD pair is to the upside and any corrective decline is more likely to get bought into.

Technical levels to watch