GBP/USD at Key 1.3000 before Employment Data

This could be the last straw for the MPC if the data is worse.


Tomorrow, the UK will release December’s Claimant Count Change for the month of December.  The claimant change count is the number of new people who have applied for unemployment benefits.   A higher number than the expectation is bad (more people unemployed) whereas a worse number is good (less people filing for unemployment.)   This is different than the headline employment number released in many countries, as most show the number of new jobs added to the economy, not the number of people filing for unemployment claims.  Expectations for the claimant count for December are for an increase of 26,000 new claims for unemployment benefits vs 28,800 in November.

In addition, Average Hourly Earnings for November are going to be released.  Expectations are for 3.3% vs 3.5% last.  Remember that this data is 2 months old, and before the elections, so it should be taken with a grain of salt.  However, it is still the most recent employment inflation data we have.

This could be the last straw for the MPC if the data is worse.  Inflation data last week was much weaker than expected.  Retail Sales data was much weaker than expected.  The MPC already has 2 dissenters who wanted to cut rates, and more have spoken recently with a more dovish tone.  GBP/USD has been trending lower since the elections.  These are all indications the market is looking for a possible cut when the BOE’s Monetary Policy Committee meets again on January 30th.

GBP/USD initially bounced as the exit polls showed Boris Johnson winning in a landslide victory, but the possibility of a hard Brexit and worse data has been helping the Pound move lower.  It is currently trading at 1.3000.  This has been a key inflection point since mid-October as this level has been used numerous times as both support and resistance.  GBP/USD is currently as the apex of a symmetrical triangle going back to election day. 

Source: Tradingview, City Index

The employment data will be key for the market and the MPC.  If the data is better than expected, GBP/USD could trade higher from 1.3000, as expectations of a rate cut on January 30th may be reduced.  However, if the data is worse than expected, the pair may continue to weaken as the expectations of a rate cut will increase. 

From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.