GBP/USD Drops As Cracks Start To Show In UK Labour Market
Fiona Cincotta August 11, 2020 9:22 AM
The unemployment rate in Britain remains defiantly at the historic low levels of 3.9%, rather than ticking higher to 4.2% as expected. That’s where the good news ends.
The unemployment rate in Britain remains defiantly at the historic low levels of 3.9%, rather than ticking higher to 4.2% as expected. That’s where the good news ends. Cracks are starting to appear in the UK labour market and they ain’t small.
Fears are rising that a post lockdown labour market crisis could hamper the so far solid economic recovery.
Attention will now turn to the UK GDP reading due tomorrow. Expectations are for a contraction in the region -20.5% after -2.2% decline in Q1. Investors will be particularly keen to see how quickly the economy is bouncing back. We know that in April GDP contracted -20.4%, in May it rebounded with a 1.8% gain. The reopening of non-essential shops in June spurred consumer spending and factories resumed productions. A strong June GDP reading could help pull the quarterly figures back into the high teens whilst boost optimism surrounding a V shaped recovery.
Following the release GBP/USD dropped lower, hit by the disappointment of such an elevated claimant count. From trading above $1.31 prior to the release, GBP/USD has skidded through the 50 sma on the 4 hour chart, although the ascending channel remains intact. Support can be seen at $1.3025, (ascending trendline) a breakthrough here could open the door to $1.2980 and onto $1.29. On the flip side, should GBP/USD push back above 50 sma at $1.3085, the pair could advance to $1.3115.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.