GBP/USD eyes UK employment report
The British pound has drifted lower on Monday. GBP/USD is trading at 1.2827 in the European session, down 0.09%.
The UK labour market remains resilient despite a cooling economy and high interest rates. Tuesday's June jobs report is expected to show strong numbers. The economy is expected to produce 158,000 jobs in June, after a banner reading of 250,000 in May. The unemployment rate is projected to remain at a low 3.8% and unemployment claims are expected to continue declining. Wage growth is expected to rise to 6.8%, up from 6.5%.
That sounds like great news, but not when you're the Bank of England and need the labour market to show some cracks and wage growth to slow down. A tight labor market and strong wage growth have hampered efforts by the central bank to lower inflation and the OECD said last week that the UK was the only major economy where inflation is still rising. The May inflation report was a disappointment, with headline inflation remaining at 8.7% and the core rate rising from 6.8% to 7.1%.
BoE Governor Bailey will likely comment on the job numbers and investors will be looking for clues about the BoE's plans at the August 3rd meeting. The BoE has raised rates to 5.0%, but more tightening will be needed in order to curb inflation and the money markets have fully priced in a peak rate of 6.5% by February.
The US dollar was broadly lower against the major currencies on Friday, after nonfarm payrolls slid to 209,000, below from the downwardly revised reading of 306,000 in May but not far from the 225,000 consensus estimate. The downturn may have surprised many investors who were caught up in the hype of a massive ADP employment release which showed a gain of 497,000.
There was speculation of a blowout nonfarm payroll reading but in the end, the consensus estimate was close and the US dollar was broadly lower on expectations that the Fed could be close to winding up its rate-tightening cycle.
GBP/USD tested support at 1.2782 earlier today. The next support level is 1.2716
There is resistance at 1.2906 and 1.2972
The UK labour market remains resilient despite a cooling economy and high interest rates. Tuesday's June jobs report is expected to show strong numbers. The economy is expected to produce 158,000 jobs in June, after a banner reading of 250,000 in May. The unemployment rate is projected to remain at a low 3.8% and unemployment claims are expected to continue declining. Wage growth is expected to rise to 6.8%, up from 6.5%.
That sounds like great news, but not when you're the Bank of England and need the labour market to show some cracks and wage growth to slow down. A tight labor market and strong wage growth have hampered efforts by the central bank to lower inflation and the OECD said last week that the UK was the only major economy where inflation is still rising. The May inflation report was a disappointment, with headline inflation remaining at 8.7% and the core rate rising from 6.8% to 7.1%.
BoE Governor Bailey will likely comment on the job numbers and investors will be looking for clues about the BoE's plans at the August 3rd meeting. The BoE has raised rates to 5.0%, but more tightening will be needed in order to curb inflation and the money markets have fully priced in a peak rate of 6.5% by February.
The US dollar was broadly lower against the major currencies on Friday, after nonfarm payrolls slid to 209,000, below from the downwardly revised reading of 306,000 in May but not far from the 225,000 consensus estimate. The downturn may have surprised many investors who were caught up in the hype of a massive ADP employment release which showed a gain of 497,000.
There was speculation of a blowout nonfarm payroll reading but in the end, the consensus estimate was close and the US dollar was broadly lower on expectations that the Fed could be close to winding up its rate-tightening cycle.
GBP/USD tested support at 1.2782 earlier today. The next support level is 1.2716
There is resistance at 1.2906 and 1.2972
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