The Pound Sterling (GBP) saw a brief surge in response to this morning’s UK labour market data, with unemployment unexpectedly falling to 4.2% in June, defying expectations of a rise to 4.5% from May’s 4.4%.
While wage data was mostly in line with forecasts, average weekly earnings dipped to 4.5% in the June quarter compared to last year, slightly lower than expected. Ex-bonus pay, however, remained relatively high at 5.4% during the same period, down from a revised 5.8% in May.
Despite the initial gains, Cable has since given back the uptick, as the possibility of a September BoE rate cut appears unlikely. BoE Governor Mann expressed concern over wage growth impacting inflation, with swaps pricing in a minimal 8-9bps easing risk.
Technical analysis shows a positive outlook for Cable, following a bullish reversal off the 200-day MA test at 1.2667 last week. While corrective gains are currently stalling around retracement resistance at 1.2810, a breakthrough the low 1.28s could pave the way for a test of the key level at 1.2850/00.
Analysis:
The drop in the UK unemployment rate and steady wage growth have provided a boost to the Pound Sterling. With the possibility of a BoE rate cut fading, investors are more optimistic about the currency’s outlook. Technical indicators suggest a bullish trend for Cable, with a potential break above 1.2850/00 on the horizon. This could lead to further gains for the GBP against other major currencies, offering opportunities for investors to capitalize on the positive momentum in the market.