Investors were pleasantly surprised as the UK claimant count rose by 23.7K in August, significantly outperforming the 95.5K expected and the 102.3K rise in the previous month. This positive data indicates a slowdown in the rate of deterioration in the UK labor market.
Despite this improvement, it is crucial to note that this is still the fastest claims growth since the unemployment spike in 2020 and the 2008 financial crisis.
Additionally, wage growth in the UK continues to slow, with a 4% year-on-year increase in the three months to July. This marks a significant deceleration from the 4.6% growth in the previous month and 5.7% two months ago. However, wage growth still outpaces inflation at 2.2% year-on-year.
The market analysts’ expectations remain unchanged, with no rate change anticipated next week but a rate cut forecasted for November. The positive employment data briefly boosted the Pound, with speculators highlighting the divergence between expectations and reality. The Pound found support at the 1.3050 level on Tuesday, indicating a potential bullish momentum to resume the upward trend.
Looking ahead, investors are advised to await the release of UK CPI figures on Wednesday morning before making significant moves. The upcoming US economic data may also influence market sentiment, with current US labor market figures appearing stronger than those of the UK. This disparity could prompt the Bank of England to consider policy easing sooner than the US, posing bearish risks for GBP/USD.
The FxPro Analyst Team
Analysis:
The UK labor market displayed signs of improvement in August, with a better-than-expected rise in claimant count and a slowdown in wage growth. Despite these positive developments, the overall economic outlook remains uncertain, with market analysts predicting a rate cut in November. Investors should closely monitor upcoming economic data releases in the UK and the US to assess potential market impacts and adjust their investment strategies accordingly.