The United Kingdom’s (UK) ILO Unemployment rose to 4.8% in the three months to August after reporting 4.7% in the previous reading, data published by the Office for National Statistics (ONS) showed on Tuesday.
The data came above the market expectations of 4.7%.
Additional details of the report showed that the number of people claiming jobless benefits rose 25.8K in September, compared with a revised increase of 17.4K in August.
The Employment Change data arrived at 91K in August versus 232K in July.
Meanwhile, Average Earnings, excluding Bonus, in the UK edged higher by 4.7% three months year-over-year (3M YoY) in August versus a 4.8% growth booked previously. The market consensus was for a 4.7% reading.
Another measure of wage inflation, Average Earnings, including Bonus, increased by 5.0% in the same period after accelerating by 4.7% in the quarter through July. The data beated the estimate of 4.7%.
The section below was published at 04:12 GMT as a preview of the UK labor market report.
UK Jobs Report overview
The UK labor market report is due for release at 06:00 GMT this Tuesday and is expected to show that the ILO Unemployment Rate held steady at 4.7% during the three months to September. Meanwhile, the Average Weekly earnings, including bonuses, are expected to rise 4.7% during the reported period, while excluding bonuses, the growth in wages is seen slowing to 4.7% from 4.8% previously.
According to Michael Hewson, an independent analyst, “the prospect of further rate cuts from the Bank of England in the near term remains less likely than the government would like. In the 3 months to July, wage growth slowed only modestly to 4.8%, from 5%, while unemployment remained steady at 4.7%.”
How could the UK Jobs Report affect GBP/USD?
A negative surprise in the UK’s wage growth numbers could accentuate the recent leg down in the British Pound (GBP) and drag the GBP/USD pair back towards the 1.3300 round-figure mark. Some follow-through weakness might expose the 1.3260 region, or an over two-month low touched last Friday.
Meanwhile, any reaction to upbeat readings is more likely to be limited on the back of the UK’s fiscal concerns, though might still assist the GBP/USD pair to surpass the 1.3365 immediate hurdle and aim towards reclaiming the 1.3400 round figure. The momentum could extend further towards the next relevant hurdle near the 1.3440 area en route to the 1.3500 psychological mark.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data.
Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates.
When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money.
When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP.
A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.
If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
