UK payrolls hit pre-pandemic record, US inflation in focus

On Tuesday, investors are expected to be cautious leading up to the release of key US inflation figures later. Market sentiment in September is driven by the timing of when central banks reduce economic stimulus. US inflation data can determine when the Federal Reserve begins its tapering plan.

There is also a possibility that inflation could cause problems for Joe Biden's $3.5 trillion social spending agenda in light of concerns that such spending might raise prices.

UK job reports support GBP

GBPUSD is trading higher on Tuesday after the data showed the UK added 241,000 jobs last month, taking the total number of payrolls to just above the pre-pandemic lockdown last year, government figures showed on Tuesday. Also, the unemployment rate fell to 4.6%.

After successfully pulling back to its dynamic support around 1.3750, the pair is heading up toward the one-month record high at 1.38880.

Employment data is likely to support the BOE hawks, but recovery moves in GBPUSD will be extended only if greenback bears sustain the movement.

Therefore, traders will wait for the US CPI for a clearer picture before reacting strongly to the British jobs report.

For August, UK PMIs were strong due to the economy creating more jobs and rising prices. Furthermore, stronger data could increase the confidence of the Bank of England and might result in a faster tapering plan.

The economy is expected to expand by 2.5% this quarter, and 1.5% next as almost all COVID-19 restrictions have been lifted in the UK while the country is getting ready to roll out booster vaccination shots to the most vulnerable people this fall.

Events of today

US Inflation data will come out at 17:00 EEST on Tuesday.

The YoY Core Consumer Price Index (CPI), which excludes the effects of volatile food and energy prices, is expected to increase by 4.2% in August, slightly slower than the 4.3% rise in July.

While MoM Core CPI is expected to have risen by 0.3% in August, the same tick grew in July.

August consumer price index is seen to have risen by 5.3% annually, slower than July's 5.4%. 5.4% was the most significant jump since August 2008.

Monthly CPI is seen to have risen by 0.4% in August after growing by 0.5% in July.