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.
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