When is the UK Jobs Report and how could it affect GBP/USD?
UK Jobs Report Overview
The United Kingdom (UK) docket has the labor market report to be released by the Office for National Statistics (ONS) on Tuesday, later this session at 07:00 GMT.
UK Claimant Count Change for October is expected to rise by 20.3K, reflecting the number of people claiming jobless benefits. The reading was 25.8 in September. Meanwhile, the Claimant Count Rate was at 4.4% in the previous month.
UK Average Earnings, including bonuses, in the three months to September, are expected to accelerate by 4.9%, following 5.0% prior, while ex-bonuses, the wages are expected to rise by 4.6% against the previous 4.7%.
UK ILO Unemployment Rate (3M) may rise to 4.9% in the three months to September, from 4.8% prior. Employment Change arrived at 91K in the previous quarter.
How could the UK Jobs Report affect GBP/USD?
The UK jobs report may reinforce the expectations that the Bank of England (BoE) will cut interest rates at its December meeting, weighing on the Pound Sterling (GBP) and the GBP/USD pair. Traders will likely observe the preliminary Gross Domestic Product (GDP) quarter-over-quarter (QoQ) for the third quarter and September’s production output data due on Thursday.
BoE Governor Andrew Bailey indicated that rate reductions are on the horizon, with economists now anticipating a pre-Christmas cut. The central bank emphasized, however, that future easing will depend on how the inflation outlook evolves.
The GBP/USD pair holds losses as the US Dollar (USD) gains support amid growing hopes that the US government shutdown resolution is nearing. The US Senate passed a funding bill in a 60–40 vote, effectively ending the 41-day shutdown, with eight Democrats joining Republicans to advance the measure, which now moves to the House for approval.
Technically, the GBP/USD pair is trading around 1.3170 at the time of writing, testing its immediate support at the nine-day Exponential Moving Average (EMA) of 1.3163. A successful break below this level would prompt the pair to navigate the region around the seven-month low of 1.3010. On the upside, the pair could approach the 50-day EMA of 1.3328.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
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