GBP Slips Lower as UK Unemployment Rises Unexpectedly
Sterling Talking Points
- UK unemployment levels showed the fastest increase in almost five years sending GBP lower against its peers.
- Upcoming FOMC and ECB minutes may push GBP back to support levels in the near-term.
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UK Unemployment Rises to 4.4% while Earnings Grow more Slowly than Inflation
GBP slipped lower Wednesday after official data showed UK unemployment rising, while wage growth continues to lag inflation. A pick-up in weekly earnings ex-bonus to 2.5% - beating expectations of an unchanged 2.4% - was tempered by a 0.1% downturn in the prior month’s number.
Commenting on today’s labour market figures, senior ONS statistician Matt Hughes wrote:
"While this is the sharpest increase in the unemployment level ONS has seen in almost five years, the number of people in work has continued to rise and there are fewer ‘economically inactive’ people – those neither working nor looking for a job. Earnings continue to grow more slowlythan prices.”
GBPUSD Turns Lower - Attention Now Turns to FOMC Minutes Later
GBPUSD dipped after the release of the ONS data but moves were restrained as traders now look ahead to the release of the latest FOMC minutes at 19:00 GMT today. Support for the pair around the 1.39300 level may be in danger in the short-term ahead of the February 14 low of 1.38000. Sterling traders should also be aware of the Treasury Select Committee meeting at 14:15 GMT where the Bank of England governor Mark Carney and three other MPC members will answer questions on the UK’s economic outlook.
GBPUSD Price Chart Fifteen Minute Timeframe (February 19-21, 2018)
Clients Remain Net-Short of GBPUSD
IG Client Sentiment data show 45.4% of traders are net-long with the ratio of traders short to long at 1.2 to 1. In fact, traders have remained net-short since Feb 13 when GBPUSD traded near 1.40144; price has moved 0.4% lower since then. The number of traders net-long is 9.5% higher than yesterday and 0.3% higher from last week, while the number of traders net-short is 4.9% higher than yesterday and 16.7% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Positioning is less net-short than yesterday but more net-short 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
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.