GBP/USD displays volatility contraction above 1.1750 ahead of Jackson Hole

• GBP/USD has shifted into an extremely tight range after printing a fresh two-year low of 1.1742.
• A discussion of 50 bps rate hike by the Fed at Jackson Hole looks certain.
• The vulnerable employment data has trimmed the confidence of the BOE in hiking interest rates.

The GBP/USD pair is auctioning in a minor range of 1.1756-1.1769 in the early Asian session. The asset is displaying a volatility contraction that results in expansion in volume and tick size. The cable has witnessed a short-lived pullback after printing a fresh two-year low of 1.1742 on Monday. The less confident pullback move is expected to turn into a fresh downside move ahead and the asset may fall to near 1.1700.

The mighty US dollar index (DXY) has recaptured the elevated territory of 109.00 and is expected to sustain above the same as investors are awaiting the Federal Reserve (Fed) chair Jerome Powell’s speech at Jackson Hole Economic Symposium.

After observing evidence of exhaustion in the price pressures and accelerating consequences of liquidity shrinkage from the economy, it is likely that the Fed will scale don its hawkish tone on the interest rates. Therefore, a rate hike by 50 basis points (bps) could be discussed at the Economic Symposium.

On the pound front, investors are still in a hangover from the downbeat employment data released last week. The Claimant Count Change landed at -10.5k, significantly lower than the expectations of -32k and the prior release of -26.8k. Also, the Unemployment Rate remained unchanged at 3.8%. The vulnerable employment data has trimmed the confidence of the Bank of England (BOE) in deploying tight quantitative measures unhesitatingly.