GBP looks to gain as UK Labour market remains strong

Summary:

• UK unemployment remains near multi-decade low

• Wages rise more than expected

• EURGBP pulls back from near 5-month high

The most recent employment figures have come in a little better than expected, with more jobs than forecast added in April while wage growth also beat to the upside. The unemployment rate remains near a multi-decade low, and all in all there’s very little here to suggest any weakness here. The actual data reads:

• Unemployment rate: 3.8% vs 3.8% expected

• Employment change: 32k vs 4k expected

• Average weekly earnings 3M/Y: 3.1% vs 3.0% expected

• Average weekly earnings (ex bonus) 3M/Y: 3.4% vs 3.2% expected   

Despite this strong data, the overall picture for the UK economy remains one that is far from thriving and it looks to be simply treading water to be honest; but given the dual headwinds of ongoing political uncertainty and a slowing global economy the current level of activity could arguably be viewed as about as good as could be expected under these circumstances. With wages around these levels there would in normal times be growing calls for a rate hike from the Bank of England to see off the threat of inflation, but it remains highly unlikely there’s any change in policy any time soon given the unresolved Brexit situation.

The pound has ticked higher in response to the data, with the GBP/USD rate moving back above the $1.27 handle while sterling has moved up to its highest level of the day against the Euro, after earlier the EUR/GBP market reached its highest price in almost 5 months. Source: xStation

EURGBP has moved back below the 0.89 handle following the data release after the pair had earlier traded at its highest level since mid-January. Source: xStation