The UK’s job numbers are out today and, similar to the last jobs report, they gave a warning sign. Jobless claims increased by 135k in a single month, the single largest increase since 2020. Average weekly gains also showed the job market weakening, falling more than expected to a 4.5% increase from 5.7% on a yearly basis. Despite the data, GBPUSD is pushing the door of the 1.28 resistance. What’s the reason for the sudden surge after the bad jobs data? 

(BOE-FED Implied Rate Spread vs GBPUSD Daily Chart) 

Central bank expectations have been the main driver of the GBPUSD currency for some months. However, from the middle of July, the correlation between them suddenly severed. While expectations for a FED cut have soared to 100 basis points, BOE cut expectations are more moderate. The correlation has turned to a negative 75% from a positive 80%. This divergence seems to be correcting itself, although this adjustment may not be solely due to changes in GBPUSD but also influenced by expectations. A 100 basis points cut from the FED is a bit excessive unless a hard landing incoming, and after today’s UK jobs data, the implied rate of the BOE might start to fall as well, closing the spread. 

(GBPUSD Daily Chart) 

On the daily chart, the uptrend is clear. Occasionally, there are sharp short-term downtrends, and after breaking out from them, GBPUSD surges to the 76.4% retracement level in the initial upward moves. Although the waves are getting smaller, hinting that the pattern is coming to an end, it might repeat itself once more. If that is the case, GBPUSD could surge to 1.2955 if the 1.28 resistance is finally captured again. However, breaking the current dip to the downside will nullify this strategy. Traders should also note that the long-term downward trend, currently near 1.30, is creating significant resistance.