Market Analysis

UK wage and employment data to set the weekly tone for the British pound

The most recent data showed a sharp rise in UK earnings, including bonuses, officially marking the fastest rise in United Kingdom wage earnings since July 2008, with the UK construction, manufacturing and parts of the UK service sector benefiting the most from the uptick in wages. It is still worth noting that the United Kingdom wage still is still far behind its pre-financial crisis peak, which saw UK wages rising by 6.60 percent, in February 2007.

The UK unemployment rate is also expected to remain at 3.9 percent this week, which is the lowest level of unemployment for the United Kingdom economy since 1975. During the recent Bank of England policy statement, members of the MPC predicted that the United Kingdom unemployment rate could eventually fall to 3.5 percent, which is just above the lowest all-time level, of 3.4 percent, which occurred in November 1973.

A continued rise in United Kingdom consumer spending has helped to boost UK employment and wages, with the recent delay in Brexit also appearing to have helped consumers spend more, as fears over the UK economy are put aside until October 31st. The conundrum for UK economists has been the expansion of the UK economy, despite the ongoing pessimism seen in consumer confidence numbers and a sharp drop in consumer credit conditions.

The worry for investors this week will be the UK claimant count, as the number of people claiming for unemployment benefits inside the UK increased by 28,000 last month, which was officially the highest monthly increase since July of 2011. If the trend higher in the UK claimant count continues, it may lead to the British pound receiving only a marginal boost if UK wage and unemployment come in better than expected on Tuesday.


GBP/JPY Daily Mountain Chart | Source: ActivTrader

GBP/JPY Daily Mountain Chart | Source: ActivTrader

The British pound has been suffering across the board from UK political uncertainty and may remain in the doldrums until the political climate becomes more certain. The GBP/JPY pair has also been falling due to traders seeking the safety of the Japanese yen currency as trade talks between the US and China falter. The GBP/JPY daily chart is highlighting a bearish head and shoulders pattern, which could be a strong indication that the pair will continue to trend lower in the medium-term.


Written by Nathan Batchelor, External Analyst, ActivTrades

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