The more positive risk mood is also helping the pound as it stays in the hunt for a third straight day of gains against the dollar. The UK labour market report earlier saw the unemployment rate fall to 3.6% - its lowest since 1974. That is helping cable find a bit of a lift towards the 38.2 Fib retracement level at 1.1737. That will be a notable resitance point before 1.1800 with the US CPI data in focus today.
As much as the fall in the jobless rate is a positive takeaway, UK pay growth continues to fall rather sharply and is something that warrants attention as inflation grips the economy. The graph here depicts a better picture of the situation.
Going back to GBP/USD, the pair has been on a major downtrend since the turn of the year in a fall from 1.3600 to near 1.1400 earlier this month. There are some positive developments growing for the pound amid fiscal relief to deal with the energy crisis and perhaps the BOE sticking its neck out to really combat inflation pressures.
That said, the Fed is also sitting in the same boat and has more leeway and leverage to work with as compared to the BOE. That will continue to keep a bit of policy divergence - or at least the potential for it - pressure on the outlook for cable.
From a technical perspective, there might be a bit scope for a correction higher now but I would wager that will invite more short positions to follow especially if we move closer to the key trendline resistance (white line) near 1.2000. But first, buyers will also have to get past 1.1800 and some notable Fib levels as seen above.
