GBPUSD Slips Despite Record Employment Figures

Talking Points

GBPUSD slipped after Claimant Count rose above economist forecasts
Employment Rate rises to record level while wages outstrip inflation

Today’s UK Employment report has slightly taken the shine out of GBPUSD, which saw a modest dip to the mid-1.4300, while the FTSE 100 saw a slight reprieve to move above 7200. The Claimant Count rose by 11.6k against consensus for 5k, while the prior month had been revised higher to 15.1k from 9.2k. However, as has been the case for many months, the focus has been on the wage components, which has now overtaken inflation for the first time in a year. Average weekly earnings ex-bonus printed in line with expectations at 2.8%, above inflation at 2.7%, subsequently ending the consumer squeeze. As a reminder, DailyFX Market Analyst Nick Cawley will be covering the UK Inflation Report Live from 8:15GMT, to register, click here.

Another positive from the report had been the suprise drop in the unemployment rate to 4.2% from 4.3%, marking the lowest unemployment rate since 1975, while the employment rate remains at record highs at 75.4%. Overall, the report is relatively good and is also likely to provide the Bank of England with comfort that it remains appropriate to raise rates next month.

Sterling at post-Brexit highs; EURGBP looking vulnerable

Sterling has had stellar run so far, now up 2.4% for the month with GBPUSD printing fresh post-Brexit highs and now looking at making a test for 1.4400. Seasonal demand, alongside the support from rising Gilt yields have been among the key drivers for Sterling strength. On a fundamental basis, EURGBP looks attractive to remain GBP bullish amid diverging UK and German yields. The Bank of England are set to raise rates next month, while the ECB is expected to keep rates on hold till mid-2019 at the earliest. EURGBP potentially heading for 08500 having recent broken through its recent base of 0.8650, support situated at 0.8620-30 holding for now.

PRICE CHART 1: EUR/GBP 1-MINUTE TIME FRAME (Intra-day)