GBP/USD recaptures 1.2050 ahead of UK jobs data

• GBP/USD recovers losses to trade back above 1.2050 amid risk reset.
• The US dollar eases while the US Treasury yields remain sluggish.
• Critical UK economic data are awaited ahead of the Fed minutes.

GBP/USD has paused its three-day sell-off near mid-1.2000s, as bears take breather ahead of the UK employment data release. The UK ILO Unemployment Rate is seen steady at 3.8% in June while the average hourly earnings ex-bonus are likely to tick higher from 4.3% to 4.5% in June.

The last jobs report came in strong and therefore lifted odds for a 50 bps BOE rate hike in September. Ever since, the energy crisis in the UK and Europe has worsened while the global economic outlook has turned dour. Besides, the UK jobs data, Wednesday’s inflation data will hold the key for the BOE’s next rate hike trajectory.

On the USD side of the equation, markets are seeing a bit of a risk recovery amid chatters over potential stimulus from China after the country reported dismal activity numbers a day ago. Although escalating China-Taiwan tensions keep investors unnerved, especially after Beijing sanctioned Taiwanese officials on Tuesday for supporting Taiwan's independence. Democratically self-ruled Taiwan continues to reject China's claim of sovereignty.

The cautious optimism is capping the recent upside in the US dollar against its major peers, with the US dollar index losing 0.07% on the day to trade at 106.48, as of writing. On Wednesday, the US Retail Sales and the Fed minutes will also grab attention, with a 50 bps September Fed rate hike seen as the best bet so far.

GBP/USD: Technical levels to consider