GBP/USD rebounds to mid-1.1000s on UK upbeat employment data, BOE’s Bailey eyed

• GBP/USD pares losses during five-day downtrend following the UK jobs report.
• UK Claimant Count Change rose to 25.5K, Unemployment Rate dropped to 3.5%during the latest release.
• British bonds join global counterparts to slump amid recession woes.
• Hawkish Fed bets, upbeat US Treasury yields may keep bears hopeful but BOE’s Bailey can trigger corrective bounce.

GBP/USD extends bounce off the intraday low following the strong UK jobs report during early Tuesday in Europe. Even so, the Cable pair bears remain hopeful amid broad risk aversion and the US dollar’s strength.

UK’s headline Claimant Count Change rose by 25.5K during September versus expectations of -11.4K and 6.3K prior. Further, the ILO Unemployment Rate dropped below the 3.6% market forecasts and prior readings to 3.5% during the three months to August.

Also read: UK ILO Unemployment Rate drops to 3.5% in August vs. 3.6% expected

Also likely to have probed the GBP/USD bears is the Bank of England’s (BOE) latest move to widen the Gilt purchase operations as it stands ready to purchase up to £10 billion of the UK bonds.

While the British jobs report impresses the GBP/USD buyers at present, the market’s rush towards risk safety and hawkish Fed bets seem to propel the US dollar and exert downside pressure on the Cable pair. That said, the US Dollar Index (DXY) rises 0.18% intraday gains as it prints a five-day uptrend near 113.40. In doing so, the greenback’s gauge versus the six major currencies traces the US Treasury yields as the US 30-year Treasury yields rise to a fresh high since January 2014 whereas the 10-year counterpart pokes the 4.0% threshold. Also favoring the DXY is the CME’s FedWatch Tool which signals a 78.4% chance of the Fed’s 75 bps rate hike in November.

It’s worth noting that the British government bonds witness a selloff and offer additional negative to the GBP/USD pair.

In addition to the aforementioned UK statistics and the broad risk-off mood, fears of the mounting UK public debt also weigh on the GBP/USD prices. “British finance minister Kwasi Kwarteng needs to make 62 billion pounds ($69 billion) of spending cuts or tax rises to stop public debt growing ever-larger as a share of the economy,” said the Institute for Fiscal Studies (IFS) on Tuesday, per Reuters.

Amid these plays, the stock futures remain depressed and add strength to the US dollar while the commodities and the Antipodeans are on the back foot by the press time, which in turn keeps the GBP/USD bears hopeful.

Moving on, Bank of England’s (BOE) Governor Andrew Bailey’s speech at the Institute of International Finance Annual Membership Meeting in Washington will be crucial for the GBP/USD traders to watch for fresh impulse.

Technical analysis

GBP/USD braces for a fortnight-old horizontal support near 1.0930-15 after breaking an upward sloping support line from September 26, now resistance around 1.1420.