Pound Sterling Recovers Some Losses Amid Mixed Employment Data
- Pound Sterling is managing to regain part of its earlier losses against the US dollar following mixed employment statistics for the three months ending in May.
- Wage growth in the UK has, as anticipated, decreased, and the ILO unemployment rate has increased to 4.7%.
- President Trump has dismissed rumors about potentially firing Fed Chair Powell soon.
Pound Sterling (GBP) is slowly bouncing back against the US Dollar (USD) during the Thursday trading session in Europe. The GBP/USD pair shows a slight recovery to around 1.3400 after dipping near a two-month low of 1.3370.
The report indicated that the number of workers hired by employers over the last three months may be higher at 134,000 compared to the previous figure of 89,000. However, the ILO unemployment rate has risen to 4.7%, exceeding both forecasts and previous readings of 4.6%.
Investors were bracing for disappointing employment numbers, especially given the latest survey from the Recruitment and Employment Federation along with KPMG, which highlighted an increase in job-seeker availability.
Employment growth has been sluggish lately, likely influenced by the rising costs employers are facing due to increased contributions to the Social Security scheme introduced during the Prime Minister’s autumn statement.
The average earnings, including and excluding bonuses, saw a 5% increase, which aligns with market predictions but marks a decline compared to figures from the three months ending in April.
This mild rise in average earnings, a key gauge of wage growth, is hoped to alleviate some concerns among Bank of England officials worried about rising inflation. This follows a recent Consumer Price Index (CPI) report that demonstrated both headline and core inflation rates have climbed more rapidly compared to the previous year, at 3.6% and 3.7% respectively.
Daily Market Update: Pound Sterling Experiences Decline Against the US Dollar
- Pound Sterling dropped by 0.13% against the US dollar on Thursday, facing pressure due to deteriorating labor market conditions in the UK and robust performance of the US dollar.
- Currently, the US Dollar Index (DXY), which measures the dollar’s value against six major currencies, is up by 0.5% at 98.80.
- President Trump has again denied rumors about firing Federal Reserve Chair Jerome Powell, while continuing to voice discontent over Powell’s reluctance to lower interest rates.
- In a Wednesday interview, Trump acknowledged that firing Powell could introduce instability into the market, stating, “If he wants to resign, it’s up to him. They say if I do it, it’s going to disrupt the market.”
- A Reuters report noted that Trump received positive feedback from Republican lawmakers after casting votes in favor of Powell’s dismissal.
- Comments from several Federal Reserve officials regarding managing consumer inflation expectations have further bolstered the US dollar. Notably, New York Fed President John Williams and Atlanta Fed President Rafael Bostic warned that the effects of tariffs on inflation are just beginning and are expected to build over time.
- “It’s been modest so far, but the economic impact of tariffs will grow,” Williams said during a speech at the New York Business Economics Association, warning that tariffs could boost inflation by “one percentage point until 2025, 2026.”
- Moving forward, investors will closely watch US retail sales data, a significant indicator of consumer spending, set to be released at 12:30 GMT. Expectations are for a 0.1% increase after a 0.9% drop in May.
Technical Analysis: Short-Term Trends for Pound Sterling
Pound Sterling fell to around 1.3370 against the US dollar on Thursday, marking its lowest levels in almost two months. The short-term outlook for the GBP/USD pair appears bearish, as it trades below the 20- and 50-day exponential moving averages (EMA), currently around 1.3525 and 1.3470 respectively.
The 14-day relative strength index (RSI) is below 40.00, indicating strong bearish momentum. The low from May 12 at 1.3140 is expected to act as a significant support level, while the high from July 11 could present a barrier around 1.3585.
Economic Indicators
Changes in Employment (3M)
The UK offices have released employment changes that reflect the number of people employed over the recent three-month period. Generally speaking, a consistent increase in this figure is seen as positive for the pound (GBP), whereas a decrease tends to be viewed negatively.
