Pound Sterling Buoyed as UK Labor Market Remains Strong
FxPro Financial Services Ltd | Mar 14, 2023 07:18AM ET
Unemployment claims in the UK fell by 11.2k in February, against analysts' average forecast of a rise of 12.5K. Jobless claims have fallen by nearly 50K over the past three months after a sustained period of stabilization, a sure sign that the economy is firmer than previously thought.
unemployment rate remained at 3.7% in the three months to January, close to a nearly 50-year low. Demand in the labor market continues to push up wages. In the three months to January, earnings, including bonuses, were 5.7% higher than a year earlier - below last year's peak but well above the inflation target.
A very high earnings growth reinforces the expectation of further policy tightening by the Bank of England. Short-term market liquidity concerns drove yesterday's repricing of market expectations for the rate. A surge in demand for short-term gilts indicates that markets are waiting for a significant tone softening.
Robust employment data provides local support for the Pound, fueling the rally. The technical picture for the GBP/USD remains bullish. Late last week, the pair was bought on a break below the 200-day moving average, potentially ending a shallow correction and consolidation in the pair since the beginning of the year.
The pair closed above its 50-day average on Monday, confirming a bullish medium-term sentiment. The Pound may now have an open path to 1.2400, repeating the December and February highs.
However, a solid move higher will likely require a divergence in monetary policy between the Bank of England and the Fed. We may get that divergence in the next few weeks if the UK continues struggling with inflation and the Fed suddenly shifts to banking sector problems.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.