The British Pound’s appreciation against the Dollar was short lived during Tuesday’s trading session as investors evaluated the likely impact of UK inflation climbing to its highest level in almost six years.

Consumer price inflation rose 3.1% in November, up from 3.0% in October, on the back of rising costs of food, transportation, and clothing. With inflation checking in at more than 1% above the Bank of England’s 2% target, Mark Carney will have to pen out an explanatory letter to Chancellor Philip Hammond. Taking a closer look at Sterling’s price action following the release, there is a suspicion that the depreciation was based on investor expectations over November’s inflation figures having little impact on the BoE rate path.

Today’s main event risk for the British Pound  will be the UK labour report which is expected to show the unemployment rate hitting a new 42 year low, at 4.2% in the three months to October and average earnings jumping to 2.5% from 2.2%. Although Britain’s unemployment rate remains encouraging, sentiment could easily take a hit if wage growth fails to meet market estimations. A situation where pay growth fails to pick up is likely to continue squeezing consumers, especially in view of inflation jumping to its highest level in almost six years at 3.1%.

Sterling was slightly shaky against the Dollar during Wednesday’s trading session, with prices trading around 1.3320 as of writing. A disappointing UK jobs report may encourage bears to challenge 1.3300 which could result in a further decline towards 1.3230. Alternatively, bulls need to break back above 1.3380 to open a path to 1.3430.

Commodity spotlight – Gold

Gold was thoroughly pummelled by sellers last week, thanks to a growing sense of optimism over US tax reforms. The yellow metal extended losses during Tuesday’s trading session, with prices tumbling towards a near five-month low at $1237 as the US Dollar stabilized. With investors marching into the trading week with a risk-on attitude, Gold remains susceptible to further losses.

Much attention will be directed towards the FOMC policy statement on Wednesday, which has the ability to impact Gold’s trajectory this week. While it is widely expected that the Federal Reserve will be raising US interest rates, much focus is likely to be directed towards the tone of the meeting. A hawkish Fed meeting may expose the zero-yielding metal to further losses, with $1230 acting as a level of interest. Alternatively, a statement which expresses concerns over low inflation and a failure to offer fresh insight into the policy outlook beyond 2017, may offer Gold a boost.

From a technical standpoint, the yellow metal remains bearish on the daily charts as there have been lower lows and lower highs. Prices are trading below the daily 20 SMA while the MACD has also crossed to the downside. Previous support around $1250 could transform into a dynamic resistance that opens a path lower towards $1230.

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