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British Pound (GBP) Price Outlook: GBP/USD Eases Despite Strong UK Jobs Data

British Pound (GBP) Price Outlook: GBP/USD Eases Despite Strong UK Jobs Data

Martin Essex, MSTA,

GBP price, UK employment news and analysis:

  • GBP/USD has eased despite better than expected UK employment data.
  • That suggests underlying weakness in the pair, although traders may be worried that job losses will rise after the UK’s furlough scheme ends.
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GBP/USD eases despite strong UK jobs report

GBP/USD eased Tuesday to its lowest level for three weeks, dipping back below 1.38, despite a bumper UK labor market report that showed UK employment up by more than economists had expected in May, average earnings including bonuses up by more than predicted in June and a lower than forecast June unemployment rate.

UK employment report

Source: DailyFX economic calendar

One explanation for the Pound’s reaction could be that the UK’s furlough scheme to help employees laid off temporarily by the coronavirus pandemic will be phased out by the end of September and it’s possible that traders are waiting to see whether that pushes job losses back up.

GBP/USD Price Chart, Hourly Timeframe (July 23 – August 17, 2021)

Source: IG (You can click on it for a larger image)

In the meantime, UK inflation data Wednesday will be next focus of attention for GBP traders, with the headline inflation rate expected by economists to dip to 2.3% year/year in July from the previous 2.5%. A larger fall might help persuade the Bank of England that a tightening of UK monetary policy is unnecessary near-term and therefore weaken GBP/USD further.

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--- Written by Martin Essex, Analyst

Feel free to contact me on Twitter @MartinSEssex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.