The British pound has climbed on Tuesday, after drifting at the start of the week. GBP/USD is currently trading at 1.3445, up 0.25% on the day.
UK employment data shines
The UK posted strong job numbers on Tuesday. Employment rose in the July-September period, as some 304 thousand unemployed persons found work during that time. There had been concern that the termination of the government’s furlough scheme at the end of September might lead to an uptick in unemployment but this was not the case, as the unemployment rate dipped lower to 4.3%, down from 4.4%. Still, there are over 2 million people receiving unemployment benefits, almost double the 1.2 million prior to the Covid pandemic. At the same time, there are a record number of job vacancies, so we could see employment numbers improve in the coming months, provided that the government does not impose new health restrictions.
The employment numbers could play a determining role in the BoE’s rate policy, as Governor Andrew Bailey told lawmakers on Monday that the bank had refrained from raising rates until it could evaluate how the labour market responded to the end of the furlough scheme. Given that unemployment has fallen, the BoE should feel more comfortable about raising rates. Bailey was questioned about the BoE’s decision not to raise rates and he responded that the bank had never promised to raise rates, but the decision was a close call. The non-move surprised the banks and was harshly criticised, and the BoE remains under strong pressure to raise rates – if not in December, then soon afterwards.
Next up are the October inflation releases, which the BoE will also be closely monitoring. Governor Bailey has said he is “very uneasy” about inflation and another high reading will support the case for raising rates. The consensus stands at 3.9% for headline CPI and 3.1% for the core reading, which would be an acceleration from the September numbers. If the readings are within expectations, we could see the pound extend its gains.
GBP/USD Technical Analysis
- GBP/USD has support at 1.3310. Below, there is support at 1.3206
- There is resistance at 1.3562 and 1.3710
