Talking Points
- UK labour force continues to grow but real wages slip year-on-year.
- GBP/USD continues to move lower with politics holding sway.
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The UK jobs market continues to defy a weak economic backdrop with the employment rate for people aged 16 to 64 rising to 75.1% from 74.5% a year ago. The number of people unemployed fell to 1.44 million, 52,000 fewer than for March to May 2017 and 215,000 fewer than for a year earlier. The unemployment rate remained steady at 4.3%, the joint lowest level since 1975.
Average weekly earnings grew slightly faster than expectations, increasing by 2.1% ex-bonus and by 2.2% inc-bonus year-on-year. However, due to rising inflation, real wages fell by 0.4% ex-bonus and by 0.3% inc-bonus compared with a year earlier.
GBP/USD slipped lower on the release as expectations for a November interest rate hike were pared back slightly, despite Tuesday’s UK inflation report showing prices rising by 3%, the highest level since April 2012. GBP has also been under downward pressure as the Brexit discussions rumble on with both sides continuing to look for further concessions from each other.
Chart: GBPUSD Five Minute Timeframe (October 18, 2017)
The latest IG Client Sentiment data shows 51.6% of traders are net-long with the ratio of traders long to short at 1.07 to 1. The number of traders net-long is 17.0% higher than yesterday and 3.8% higher from last week, while the number of traders net-short is 9.0% higher than yesterday and 5.6% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBPUSD prices may continue to fall. Positioning is more net-long than yesterday but less net-long from last week. The combination of current sentiment and recent changes gives us a further mixed GBPUSD trading bias
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--- Written by Nick Cawley, Analyst
To contact Nick, email him at nicholas.cawley@ig.com
Follow Nick on Twitter @nickcawley1
