GBP/USD jumps above the 1.2950 mark ahead of US inflation data

• GBP/USD surges above the 1.2950 area, hitting the highest since April 2022. 
• Solid UK employment data indicated more Bank of England (BoE) rate hikes.
• Federal Reserve (Fed) expectations may change based on the US inflation data on Wednesday.

The GBP/USD pair climbs above the psychological 1.2950 round mark and holds above that level in the early Asian session this Wednesday. The pair flirts with 15-month highs,  underpinned by broad US dollar weakness and the possibility of further rate hikes by the Bank of England (BoE).

The Office for National Statistics (ONS) reported on Monday that the United Kingdom’s (UK) ILO Unemployment Rate rose to 4.0% in the quarter to May from 3.8% in the three months to April. Additionally, the Claimant Count Change showed a significant increase. The figure jumped by 25.7K in June versus the previous month’s -22.5K. The Average Earnings, excluding bonuses, came in at 7.3% 3Mo/YoY May versus 7.3% prior and 7.1% market consensus. 

The UK solid employment report indicated that the Bank of England (BoE) will likely raise interest rates further. The possibility of further monetary policy tightening by the BoE compared to the Federal Reserve lends some support to the Sterling Pound and exerts downward pressure on the US Dollar. 

Meanwhile, New York Fed President John Williams said the Fed is expected to increase interest rates by about a half percentage point this year. However, market participants believe that the tightening cycle is about to end. Nevertheless, the Fed expectations may change based on the US inflation data on Wednesday. 

Looking ahead, market players will pay attention to BoE Governor Andrew Bailey’s speech and the US Consumer Price Index (CPI) later in the day. 

Later in the week, investors will look forward to the UK Gross Domestic Product (GDP), Goods Trade Balance and Industrial Production MoM. Moreover, the Producer Price Index (PPI), Unemployment Claims, and the Preliminary University of Michigan Consumer Sentiment from the US will also grab some attention. 

Technically, GBP/USD is back above the 1.2900 region, resistance-turned-support on Wednesday. The next strong barrier at the 1.3000 area is next on the card, while the critical support is seen at 1.2900.