Pound Surges to Fresh Post Brexit High As UK Employment Data Impresses

Latest commentary

The number of people in employment unexpectedly jumped in the three months to November, as did wages excluding bonuses. Official data has given pound traders reason to cheer as the UK economy continues to hold up slightly better than expected. 

Whilst the economy has notably slowed since the Brexit referendum, and inflation has jumped to 3%, job creation has remained firm. The number of people in work increased by 102,000 people in the three months to November, the biggest increase in the number of people being employed since the three months to July. This take the number of people employed in the UK to 32.2 million. Forecast had pointed to a 13,000 decline in the number of those starting work.  

Meanwhile total pay excluding bonuses increased 2.4%, ahead of the 2.3% forecast and increase from the three months to October. This represents the biggest increase in wages since the three months to December 2016.  

These figures prove that demand for workers is still strong, despite unemployment remaining at historically low levels of 4.3%. This is inline with BoE expectations that the recent steep fall in unemployment will begin to boost wage growth. 

With inflation ticking lower, down from 3.1% in November to 3% in December and wages creeping northwards, pressure should be slowly easing for households. Whilst the change will be too small for consumers to feel on their purses right now, a few more months in this direction and the difference should be more noticeable.  

Market reaction: 

The positive tone to the labour report pushed the pound to a fresh post Brexit high of $1.4118, a 1% gain on the day. The psychological level of $1.40 offered little resistance to the pair advancing and could now provide support when the next correction occurs. 

The stronger pound continues to take its toll on the FTSE, which is down 0.2% on the day at 7710. A break below this level could indicate the start of another move lower, pulling 7685 into sight as the next downside target.  

US points to strong start: 

Looking across to the US open, equity indices are pointing to a positive start. Concerns over souring Sino-US relation are not impacting on US stock markets, instead showing itself in the dollar, keeping the greenback at 3-year lows. On the earnings front – Ford will be in the spotlight with earnings release due before the market opens. Ford is currently down 0.5% in pre-market trading.

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