UK Employment Data Disappoints Undercutting Sterling |
From Bloomberg: “U.K. jobless claims surged more than economists expected in May and wage growth slowed, pointing to a continued squeeze on households as inflation accelerates.
Jobless-benefit claims jumped 19,600 from April, when they rose a revised 16,900, the Office for National Statistics said today in London. The median forecast of 22 economists in a Bloomberg News survey was an increase of 6,500. Wage growth excluding bonuses slowed to 2 percent in the three months through April, the weakest since the quarter through August.
Based on a separate International Labor Organization measure, unemployment fell by 88,000 in the three months through April, the most since 2000, the statistics office said. While there are mixed signals from the labor market, inflation is outpacing wage growth, squeezing consumers whose confidence is also being undermined by concerns about government budget cuts.”
As we can see from the chart of the Claimant Count above, the number of claims has turned up recently, a sign of deterioration in the labor market. If the UK economy continues to shed jobs, that would put the onus on the Bank of England to keep rates steady in order to support the recovery. That expectations hurt the GBP in today’s trading against key rivals.
The GBP/USD rallied early in the week but was unable to test its highs from last week near 1.6460. After falling gradually in the US and Asian session, the Pound sharply extended its losses following the poor jobs data. It was also much weaker against the AUD and CAD. If the GBP/USD moves past its support at 1.6220, that opens up further losses at the 1.6170 level and our lows from May near 1.6050.
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