Talking Points:
- The UK unemployment rate fell to 5.0%, lowest since October 2005
- Core weekly earnings rose to 2.3% vs 2.0% expected
- GBP/USD pushed higher as the news hit the wires, but then stalled
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The British Pound pushed higher versus other major currencies, but then stalled, after today's UK employment data printed upbeat figures. The Office for National Statistics (ONS) reported that the unemployment rate from February to April fell to 5.0% from the prior and expected reading of 5.1%. This marked the lowest rate since October 2005.
The UK added 55K jobs in the same time period, which was slightly below the expectation for 60K, but above the prior 44K print. The Jobless Claims figure beat expectations and signaled a drop of -0.4K, which was just slightly better than the expected call for no change. The prior reading was revised for the worse to 6.4K from the prior -2.4K print.
Wage figures showed that Core average weekly earnings (which excludes bonuses) rose to2.3% in the three months to April from the prior revised 2.2%, which was above the expected drop to 2.0%. Average weekly earnings including bonuses was unchanged at 2.0%, but was above the 1.7% expected print.
The figures came a day after the UK CPI figures missed expectations. In “normal” trading conditions, higher wages and lower unemployment readings could have been interpreted as contributing to inflation pressures, and thus to a more hawkish BoE outlook. With that being said, the market seems to focus on the upcoming EU Referendum, with the GBP/USD fluctuating aggressively on “Brexit” polls. Taking this into consideration might explain why a very upbeat jobs report saw only an initial push higher for British Pound versus other majors before stalling.
Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing that about 63.5% of traders are long the GBP/USD at the time of writing. The SSI is a contrarian indicator, implying further weakness ahead for the pair.
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GBPUSD 5-Minute Chart: June15, 2016
--- Written by Oded Shimoni, Junior Currency Analyst for DailyFX.com
To contact Oded Shimoni, e-mail oshimoni@DailyFX.com
