GBP/USD remained confined in a range through the first half of the trading action on Tuesday.
The risk-on mood undermined the safe-haven USD and extended some support to the major.
The mixed UK monthly jobs report for August failed to impress bulls or provide any impetus.

The GBP/USD pair extended its sideways consolidative price action and remained below mid-1.3800s following the release of UK monthly employment details.

The pair struggled to capitalize on the previous day’s goodish rebound from sub-1.3800 levels and remained confined in a narrow trading band through the first half of the trading action on Tuesday. The prevalent risk-on environment held the US dollar bulls on the defensive, which, in turn, was seen as a key factor that extended some support to the GBP/USD pair.

The pair had a rather muted reaction to the mixed UK jobs report, which showed that the number of people claiming unemployment-related benefits decreased by 58.6K in August as against 71.7K fall anticipated. The slight disappointment, however, was offset by the expected decline in the unemployment rate – to 4.6% during the three months to July – and did little to provide any impetus.

On the other hand, expectations for an imminent Fed taper announcement, along with a modest uptick in the US Treasury bond yields acted as a tailwind for the USD and should cap gains for the GBP/USD pair. Investors might also refrain from placing aggressive bets, rather prefer to wait for a fresh catalyst from Tuesday’s release of the latest US consumer inflation figures.

The US Producer Price Index (PPI) for August recorded the largest gain since November 2010 and indicated that higher inflation could persist for some time. A stronger US CPI report, scheduled for release later during the early North American session, will reaffirm expectations that the Fed will begin rolling back its massive pandemic-era stimulus later this year.

This, in turn, will play a key role in influencing the near-term USD price dynamics and provide some meaningful impetus to the GBP/USD pair ahead of the upcoming FOMC meeting on September 20-21. In the meantime, the broader market risk sentiment and the US bond yields, would drive the USD demand and allow traders to grab some short-term opportunities around the major.

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