Talking Points:
- The UK unemployment rate remained unchanged at decade low 5.1%, as expected
- Core weekly earnings slowed to 2.1% vs 2.3% expected and prior 2.2%
- GBP/USD traded lower after the news hit the wires
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The British Pound traded lower versus other major currencies (at the time this report was written) after today's UK employment data printed solid figures. The Office for National Statistics (ONS) reported that the unemployment rate from January to March remained unchanged at 5.1%, as the prior and expected rate.
The UK added 44K jobs in the same time period, which was above the expectation for no change and the prior 20k print. The Jobless Claims figure beat expectations and signaled a drop of -2.4K, which was better than the expected rise of +4.5K. The prior reading was revised for the worse to +14.7K from the prior +6.7K print.
Wage figures showed that Core average weekly earnings (which excludes bonuses) cooled to 2.1% in the three months to March from the prior 2.2%, which was below the expected rise to 2.3%. Average weekly earnings including bonuses rose to 2.0% from the prior revised 1.9%, above the 1.7% expected print.
Looking into the report, the ONS said the employment rate (the proportion of people aged from 16 to 64 who were in work) was 74.2%, the highest since comparable records began in 1971.
The figures came a day after the UK CPI figures missed expectations. In the context of a BoE that is far from its inflation target of +2.0%, today’s figures might have been interpreted as mixed on the wage growth front, with the core earnings below expectations while the total earnings beat expectations.
In their latest rate decision, the BoE kept policy unchanged, and warned of risks from a “Brexit” from the European Union, saying such an outcome could bring lower growth, higher unemployment, and higher inflation.
Taking this into consideration, it appears the market focused on the core figures today in regards to inflation pressures, which might have dampened the perception for the possibility of a more hawkish BoE outlook, while also adding to an overall uncertain picture posed by “Brexit”.
DailyFX Currency Strategist Michael Boutros identified Near-term resistance for the GBP/USD at the 1.4528/33 zone.
Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing that about 54.5% of FXCM’s traders are long the GBP/USD at the time of writing. The SSI is used as a contrarian indicator, implying further weakness ahead for the pair.
You can find more info about the DailyFX SSI indicator here
GBPUSD 5-Minute Chart: May18, 2016
--- Written by Oded Shimoni, DailyFX Research
