Unemployment Falls Further
The British Pound is trading higher today in response to the latest set of employment data. The release from the Office for National Statistic showed that the UK jobs roll hit a record higher last month with the economy adding more than 200k jobs, taking jobs to their highest level since 2014. The headline unemployment rate was seen falling back to 4.5% in the three months through August. Additionally, average earnings were seen beating expectations also with the figure rising to 7.2% versus 6.9% forecast.
BOE Tightening Expectations
The rise in employment is heightening expectations that the BOE will move on rates by the end of the year. There has been growing speculation that the BOE will be forced to tighten its headline policy rate in a bid to curb spiralling inflation. The rise in energy prices, as well as broad supply-chain issues and post-Brexit labour shortages means that prices have been surging over recent months.
Concerns Over Recently Unemployed
While the BOE is keen to curb these price pressures, any rate hike will also come at a difficult time for the many unemployed people who lost government support following the end of the furlough support scheme at the start of the month. However, with price pressures soaring and looking unlikely to abate in the near term, hawks are urging the bank to take action and avoid a dangerous state of inflation in the UK where CPI is already close to double the bank’s 2% target.
Officials Pushing For Rate Hike
Over the weekend we heard from two key BOE officials, Saunders and Ramsden, who both called for rate hikes much “earlier than expected”. Indeed, the market is now pricing in a rate hike before the end of the year in line with recent commentary from BOE governor Andrew Bailey. Bailey recently voiced his willingness to move on rates ahead of the end of the year if necessary. The big question now, is when those rate hikes will come specifically.
For now, GBPUSD is being capped by the resistance trend line of the bear channel from YTD highs. Price recently rebounded off the 1.3461 lows though, while the channel holds, the focus is on further downside. Should price break the current highs (1.3676), 1.38 is the next upside level to note.