The British pound weakened against the USD after weak UK employment data
GBPUSD yesterday drew a bearish candle with a long body with a slight shadow at the bottom of the candle. Price formed a high of 1.28726, dropped to a low of 1.27185, and closed at 1.27500. The price drops across the lower band and MA 200 from the upside.
The employment data report released yesterday showed weak data. The unemployment rate rose 4.3% while average income grew faster than expected in the last three months. The Office for National Statistics reported that the ILO Unemployment Rate rose to 4.3% from 4.0% in the three months ended August, higher than estimates of 4.1%. In the same period, UK employers added 219k new workers, less than the previously revised 373k.
Slowing UK labor demand seems to be weighing on the Pound Sterling despite other positive data. Annual growth in average employee regular earnings excluding bonuses in the UK was 4.8% in July to September 2024, and annual growth in total earnings including bonuses was 4.3%. This total annual growth is influenced by one-time payments to civil servants made in July and August 2023.
Meanwhile, the BoE is expected to lower interest rates at its December meeting. Investors expected a 25 basis point cut. However, according to BoE Chief Economist Huw Pill, salary growth is still quite stiff at a high level making it difficult to align with the bank's inflation target of 2%, it seems possible they will hold interest rates longer.
On the other hand, Trump's protectionist policies are predicted to increase inflationary pressures so that the Fed may take a gradual policy easing approach. In December, it is predicted that the Fed will cut interest rates by 25 basis points. According to the FedWatch tool, the possibility of a 25 basis point cut is 58.7%, and the possibility of interest rates remaining unchanged is 41.3%.
Next, investors today will focus on US CPI data. The core CPI is predicted to be 0.3%, the same as the previous revision, the CPI m/m is also predicted to be the same as the previous 0.2%, while the CPI y/y is forecast to rise 2.6% from the previous 2.4%.
