GBP/USD Slipping After UK Unemployment Data

GBP price, news and analysis:

• The UK unemployment rate dipped to 5% in January from 5.1% the month before rather than rising to 5.2% as analysts had predicted.
• There was little impact on GBP, with GBP/USD trading sideways around the 1.3840 level, but it has since eased back.
• There may be more reaction to Wednesday’s UK inflation report, which is expected to show a small rise in the year/year headline rate.

GBP/USD stable after better-than-expected UK employment data

The UK unemployment rate fell unexpectedly to 5% in January from 5.1% the month before, wrong footing analysts polled by the news agencies who had predicted an increase to 5.2%. However, there was little response in GBP/USD, which continues to trade below resistance at 1.40.

Note, though, that the price has fallen below the 50-day simple moving average that has supported it – except for a couple of blips – since early November last year. This could be a negative signal, although there is no sign yet of the pair breaking lower.

GBP/USD Price Chart, Daily Timeframe (July 31, 2020 – March 23, 2021)

Source: IG (You can click on it for a larger image)

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Looking at the labor-market report in more detail, employment fell by less than expected while average earnings including bonuses edged ahead to 4.8% but the rise was also less than forecast. The numbers, though, are from earlier in the year, which is perhaps why there was little reaction in the FX markets.

Source: DailyFX calendar

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Of more interest to the markets, perhaps, will be Wednesday’s UK inflation report that is forecast to show a small increase in the headline rate year/year but no change in the core rate.

Source: DailyFX calendar

If the inflation rate is less than expected that could prompt losses for GBP/USD and it is worth noting that IG client sentiment data are also suggesting a bearish outlook for the pair.

— Written by Martin Essex, Analyst

Feel free to contact me on Twitter @MartinSEssex