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UK Unemployment RisesThe British Pound is seeing some selling pressure through early European trading on Tuesday with GBPUSD turning lower from yesterday’s highs. The latest UK economic data released today showed average earnings holding steady at 4.7%, despite expectations for a drop to 4.3%, while the unemployment rate ticked slightly higher to 4.3% from 4.2% prior. Finally, the claimant count was seen rising to 8.9k from -2.4k prior, below the 13.9k expected.
BOE’s Pill Warns Over InflationFollowing the data we heard from BOE chief economist Huw Pill. Pill’s comments were broadly dovish, telling reporters that he believes through the summer the UK is likely to see inflation at a level that will allow the BOE to cut rates. However, Pill did flag up risk factors, saying that inflation is still running above target and there is some disagreement within the MPC regarding the likely persistence of inflation at this level. Looking ahead, Pill warned that the bank does see a fresh pickup in inflation this year, adding that there is still work to be done to ensure inflation returns to target sustainably.
Market ReactionLooking at the reaction in GBP, it seems that for now traders are focusing on the fresh rise in unemployment and Pill’s comments supporting expected rate cuts this year. However, the stickiness in wages at current levels seems to endorse Pill’s warnings around persistent inflation meaning that GBP is unlikely to see a steady sell off from here.
Technical ViewsGBPUSD
The rally in GBPUSD has been capped for now into a test of the bear trend line and the 1.2612 level resistance. This is a clear pivot in the market with bulls looking to test 1.2832 next if price breaks above. To the downside, 1.2437 and 1.23 remain key support levels to note. More By This Author:US Market Commentary – Monday, May 13
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