The UK labor market reports for June and July were released today. The data came in rather mixed but painted a moderately pro-inflationary picture, triggering a short-lived upside in the GBPUSD pair, with the potential for consolidation in the medium term. Employment figures cooled locally, though steady wage growth stole the spotlight, tying the Bank of England’s (BoE) hands and making aggressive monetary tightening a less probable scenario.
The latest UK labor market statistics reflect the country’s structural economic challenges: a shortage of highly qualified workers keeps pushing business costs upward.
British jobless claims fell by 11,000 in July, against the expected decline of 16,500. This is a clear sign of candidates’ relentless activity. However, the net reading for April-June was quite disappointing, coming in at just 83,000 compared to the previous 147,000.
Meanwhile, the unemployment rate climbed to 4.9% in June, exceeding forecasts of 4.8% and matching May’s unfavorable result. What does this suggest? The BoE’s tight monetary grip is weighing heavily on the real economy.
Average wages surpassed analysts' expectations across the board. Including bonuses, growth stood at 4.1% (forecast: 4.0%), while excluding them, it reached 3.5% (forecast: 3.4%). For the UK regulator, a wage increase above 3% is a key indicator of persistent services inflation, which rules out any hasty easing of monetary policy.
So, how do these data influence the pair? The divergence between the dollar and the pound is widening, favoring the latter.
Wage growth of 4.1% means that inflationary pressure in the UK remains sticky. At upcoming meetings, the BoE is poised to adopt a wait-and-see approach, holding rates at the same level to avoid another spike in consumer prices. This provides the pound with a solid pillar of support.
Unlike the UK, the US economy is now showing signs of cooling. The market has grown increasingly convinced that the Federal Reserve (Fed) will ease its policy faster and sooner than expected. The dollar, of course, could feel the heat, allowing the pair to climb higher.
The overall recommendation is to buy GBPUSD. Profits should be taken at 1.36000. Stop Loss could be set at 1.34850.
The volume of the open position should be calculated so that the potential loss (protected by a Stop Loss order) does not exceed 1% of your deposit. If your account balance does not allow opening a position of this size, it is better to avoid entering the market on this signal and wait for other trade options that meet low-risk criteria.
This content is for informational purposes only and is not intended to be investing advice.
