GBP/USD Bounces Off Of 1.50 Ahead of the U.K. Jobless Claims Report
Jobless claims in the U.K. are expected to drop another 20.0K in June after falling 30.9K in May. Last month, the unemployment rate in Great Britain fell to its lowest level since April 2009, while the ILO unemployment rate retreated from its highest level since 1996 during three months through May. This month, economists are forecasting the unemployment rate to tumble to 4.5%, marking the lowest jobless rate in the region since March 2009. With this earnings season kicking off, better than expected releases may fuel additional employment gains; thus far, Alcoa has beaten analyst estimates. Indeed, employment may not fully start growing until companies are certain about their revenue outlook. Also providing some support to the workforce is the government’s recent emergency budget plan. The government pledged to cut the corporate tax rate from its current level of 28 percent to 27 percent in 2011 and 26 percent in 2012, which will likely increase business investment and employment next year. It is worth noting that unemployment has pushed higher less than during the previous recessions. In reference to rates, the Bank is England may keep its key overnight lending rate unchanged for the rest of the year amid weak private sector spending and tightening in fiscal policy. Despite the bank holding its asset purchases at 200 billion pounds, it is noteworthy that policy makers have made it clear that purchases could resume later this year if the recovery fails to gain momentum.
GBP/USD: After breaking above the falling trend line which has held since earlier this year, the pair has not looked back. Price action now remains supported by the 20-day SMA and has bounced off of the key psychological support level of 1.500. At the same time, the 20-day SMA has crossed over above the 100-day SMA, which is indicative of further gains. However, traders should caution entering into a position as daily studies indicate that the pair is nearing oversold levels.
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Written by Michael Wright, Daily FX Research
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Michael Wright is the author of FX Headlines, Fundamentals vs. Technical’s, Weekly Spotlight, and Forex Trading Weekly
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