During the European session today, there were some European and British data, which had a notable impact on the markets, despite the fact that all eyes are on the Federal Reserve later tonight. Yet, the UK figures had a notable impact on GBP pairs across the board ahead of the key event (Fed decision) and the BOE decision tomorrow. In this article we will take a look at the UK jobs report, what does it mean for the Bank of England and GBP.
Definitions
Average Earnings Index: Change in the price businesses and the government pay for labor, including bonuses. Data represents the 3-month moving average compared to the same period a year earlier. A figure that excludes bonuses is also released, but not included for lack of significance.
Claimant Count Change: Change in the number of people claiming unemployment-related benefits during the previous month. It’s the first indication of the employment situation, released a month earlier than the Unemployment Rate.
Unemployment Rate: Percentage of the total workforce that is unemployed and actively seeking employment during the past 3 months. Released monthly, about 45 days after the month ends.
Why This Is Important?
- Earnings Index: It’s a leading indicator of consumer inflation – when businesses pay more for labor the higher costs are usually passed on to the consumer.
- Claimant Count Change & Unemployment Rate: Although it’s generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labor-market conditions. Unemployment is also a major consideration for those steering the country’s monetary policy.
What Matters The Most?
In today’s outcomes, we had a close eye on the wages growth, the entire data showed an acceleration last month, whether including or by excluding bonuses. The Core wages growth posted the highest YoY reading since August of last year, while the YoY Average Earnings Index advanced for the first time in three months. With yesterday’s inflation data, this is positive for growth and inflation. Yet, the Bank of England might not be as happy as before, especially with the ongoing QE program and the latest rate hike.
Many have said that the Bank of England took a wrong decision when it expanded its asset purchases facility and cuts the interest rate right after the Brexit vote. However, trades needs to be aware that the Brexit effect is not there yet. The negotiations will continue for some time and unlikely to finish before Q2 of next year. Therefore, the BOE decision is considered as a proactive decision before the official Brexit is announced and implemented.
GBP Testing Major Levels
GBPUSD managed to stabilize above 1.26 for the past few weeks, which improved the technical outlook ahead of the Federal Reserve and the Bank of England decision later this week. In the meantime, the pair is approaching a major resistance level which stands at 1.2740, which represents the previous top back in November of this year, which should be watched very carefully, as a breakout would improve the technical outlook even further, which may push the pair all the way above 1.28 in the coming hours or days. Yet, with the ongoing stimulus policy by the BOE sellers are likely to increase their short selling holdings as there are bets of further declines below 1.20 later next year.
Levels To Watch
| Symbol | S3 | S2 | S1 | Pivot | R1 | R2 | R3 |
| GBPUSD | 1.2549 | 1.2599 | 1.2629 | 1.2679 | 1.2709 | 1.2759 | 1.2789 |
| EURGBP | 0.8277 | 0.8307 | 0.8351 | 0.8381 | 0.8425 | 0.8455 | 0.8499 |
| GBPJPY | 143.91 | 144.67 | 145.24 | 146.00 | 146.57 | 147.33 | 147.90 |
| GBPAUD | 1.6642 | 1.6743 | 1.6812 | 1.6913 | 1.6982 | 1.7083 | 1.7152 |
| GBPCHF | 1.2656 | 1.2722 | 1.2767 | 1.2833 | 1.2878 | 1.2944 |
1.2989 |
