Stronger UK Job/Wage Growth to Curb GBPUSD Losses

Trading the News: UK Employment Change

Updates to the UK Employment report may generate a short-term rebound in GBPUSD as the economy is expected to add 60K jobs in June.

Image of DailyFX economic calendar

At the same time, the Average Weekly Earnings are anticipated to pick up during the same period, and signs of stronger job/wage growth may keep the Bank of England (BoE) on track to further normalize monetary policy as “the Committee judges that increases in interest rates, at a gradual pace and to a limited extent, would beappropriate to return inflation sustainably to the 2% target.”

In turn, the Monetary Policy Committee (MPC) may stick to the same script at the next meeting on September 19, and Governor Mark Carney and Co. may continue to endorse a wait-and-see approach as the central bank insist that “the monetary policy response to Brexit, whatever form it takes, will not be automatic.”

However, another batch of mixed data prints may spark a bearish reaction in the British Pound as it puts pressure on the BoE to alter the forward guidance for monetary policy.

Impact that the UK Employment report had on GBP/USD during the previous release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

MAY

2019

07/16/2019 08:30:00 GMT

45K

28K

-11

-56

May 2019 UK Employment Change

GBP/USD 5-Minute Chart

Image of gbpusd 5-minute chart

The UK Employment report showed the economy adding 28K jobs during the three months through May, while the jobless rate held steady at 3.8% for the third consecutive month.

A deeper look at the report showed Average Weekly Earnings unexpectedly climbing to 3.4% from 3.2% in April, while Jobless Claims increased 38.0K in June after expanding a revised 24.5K the month prior.

The mixed data prints triggered a limited reaction in the British Pound, with GBPUSD consolidating throughout the day to close at 1.2407. Learn more with the DailyFX Advanced Guide for Trading the News.

GBP/USD Rate Daily Chart

Image of gbpusd daily chart

  • Keep in mind, the broader outlook for GBPUSD is no longer constructive as the exchange rate snaps the upward trend from late last year after failing to close above the Fibonacci overlap around 1.3310 (100% expansion) to 1.3370 (78.6% expansion).
  • More recently, GBPUSD has snapped the range-bound price action from earlier this month, with the break/close below the 1.2100 (61.8% expansion) handle opening up the Fibonacci overlap around 1.1890 (61.8% expansion) to 1.1950 (78.6% expansion).
  • Will keep a close eye on the Relative Strength Index (RSI) as it holds in oversold territory, with the next area of interest coming in around 1.1680 (161.8% expansion) to 1.1730 (78.6% expansion).

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— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.

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