As labor cost data proved sturdier than predicted. The Pound Sterling (GBP) made a north-side vertical. Advance barely over the round-level resistance of 1.2900. The GBPUSD pair has gained tremendous momentum. As the likelihood of a significant interest rate hike by the Bank of England (BoE) has increased. With the understanding that more disposable income available to consumers would result in stronger purchasing power. And eventually, total demand will rise further.
United Firms in the Kingdom are raising pay to recruit new employees in the face of labor shortages. Examining the employment statistics reveals that the unemployment rate has risen. As businesses have begun to avoid lending owing to increasing interest rates. The likelihood of the Bank of England raising interest rates remains strong. Since increased wage pressures are sufficient to outweigh the impact of an increase in the unemployment rate.
The Pound Sterling capitalizes on positive labor statistics.
The pound seeks to breach over 1.2900. The cost of labor in the United Kingdom has been higher than predicted.
Three-month average earnings excluding bonuses have held stable at 7.3%, despite investors expecting a drop to 7.1%.
Claimant Count Change has increased to 25.7K, while Last month, claims fell by 22.5K. The three-month unemployment rate has risen to 4.0%, above estimates and the previous announcement of 3.8%.
Increased wage pressures are adequate to counteract a considerable increase in the unemployment rate.
Market investors anticipate that the Bank of England’s interest rates will peak at 6.25-6.50%.
On Monday, Bank of England Governor Andrew Bailey stated that the central bank will continue to monitor the labor market in order to reduce inflation.
Andrew Bailey highlighted the central bank’s efforts to create a price-stabilizing environment.
FM in the United Kingdom On Monday, Jeremy Hunt stated that the government and the central bank “will do whatever is necessary, for as long as it is necessary” to restore inflation to 2% target. Inflation in the British economy has slowed from its peak of 11.1%, but UK Prime Minister Rishi Sunak’s pledge that inflationary pressures would be cut in half by the end of the year has been broken.
Firms in the United Kingdom are increasing their payroll expenses to compensate for workforce shortages.
According to a British Retail Consortium (BRC) poll, increasing food costs have tightened consumer finances, reducing demand for big-ticket products.
Households are bearing the weight of strong price pressures since the rate of inflation is faster than the rate of labor cost increases.
Andrew Bailey asked industry regulators last week to cease overcharging customers for gasoline.
The UK’s economic calendar is jam-packed this week, with the labor market data being followed by the Financial Policy Committee (FPC) minutes on Wednesday and the Industrial and Manufacturing statistics (May) on Thursday.
Monthly Manufacturing Production and GDP (Gross Domestic Product) is predicted to fall by 0.4%. Manufacturing output is expected to fall by 0.5%.
Market mood is fairly positive, with a strong demand for risky currencies.
The US Dollar Index (DXY) has extended its three-day losing streak as investors hope the Federal Reserve (Fed) has just one interest rate rise left in its toolbox.
In a lecture at the University of San Diego, Cleveland Fed President Loretta Mester stated, “The economy has shown more underlying strength than anticipated earlier this year, and inflation has remained stubbornly high, with progress on core inflation stalling,” according to Reuters.
The Consumer Price Index (CPI) in the United States will be closely studied this week. According to the preliminary data, the monthly headline CPI given at a faster rate of 0.3% than the previous rate of 0.1%. Furthermore, core inflation, which includes oil and food costs, is predicted to keep pace with the headline CPI.
Technical Outlook
The pound sterling has extended its three-day winning streak after breaking over Monday’s high of 1.2868. The Cable is approaching the daily Rising Channel chart pattern, in which each retreat is regarded as a buying opportunity for investors.
Upward-sloping daily Exponential Moving Averages (DEMAs) of 50 and 200 periods imply that the overall trend is quite positive. Bounded oscillators are showing significant strength in the upward momentum.
