Unemployment Rate Rises Again

The latest economic data from the UK this week showed that the unemployment rate continued to rise in the three months to September. The unemployment rate hit 4.8% over the period, increasing from the prior quarter’s 4.5% reading. Redundancies were also seen moving to a fresh record high over the period with 314k people being laid off, according to the Office for National Statistics.

The UK employment landscape has drawn a great deal of attention recently. With the furlough scheme having initially been due to expire at the end of October, many firms were laying off workers in anticipation of not being able to afford to keep staff on. With this in mind, many analysts and economists were predicting an employment “cliff edge” over the coming months as struggling firms crumbled under the absence of government support. The fresh lockdown measures also added to these fears. However, along with the new lockdown measures, the government also announced that it will extend its furlough scheme through to March. This news has helped alleviate fears of a dramatic escalation in redundancies and unemployment over the coming months.

Looking at the breakdown of the ONS data, a further 243k people were noted to be out of work over the three months to September, marking the largest increase since May 2009. There was also a drastic rise in unemployment among the 16 – 24 age group.

BOE Announces Fresh Stimulus

Along with the extension of the government furlough scheme, which has also seen increased support for self-employed people, the BOE recently upgraded its monetary policy support. The BOE announced a fresh £150 billion injection at its recent meeting, aimed at lowering borrowing costs for households and struggling businesses. The BOE now has£895 billion worth of stimulus in play while rates remain at record lows of 0.1%. Referring to the extension of the government’s furlough scheme, the BOE said that this would greatly help weaken the blow to the economy over coming months and now expects the unemployment rate to peak at 7.75%, only slightly higher than the 7.5% forecast made previously.

Looking ahead the BOE reaffirmed its commitment to maintaining accommodating monetary policy, saying: “The committee does not intend to tighten monetary policy at least until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably.”

Technical Views

GBPUSD

From a technical viewpoint. GBPUSD continues to trade higher here as the recovery off the 1.2649 level develops further. Price has now broken back above the 1.3191 level and is close to challenging the underside of the broken bullish channel. While above the 1.31919 level, bulls will look for a test of 1.3516 next.

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