UK Labour Market Data

The British Pound is trading higher today on the back of the latest UK labour market figures released this morning. The unemployment rate was seen falling to its lowest level since January at 4%. The bigger news, however, was that wage growth fell to its lowest level since 2022, falling for a fourth consecutive month. At 4.9%, wages are now at their weakest since June 2022, reinforcing expectations that the BOE will continue with signalled easing. Adjusted for inflation, wages sank to 1.4% from 1.9% prior, excluding bonuses.

Wages Sink

The data on wage movements supports the view that UK inflation is expected to continue falling ahead of the next BOE meeting. Last time around the bank signalled that it would press ahead with further cuts as needed with traders widely pegging the bank to reduce rates further when it meets next month.

UK CPI Due

Tomorrow, the market is forecast headline annualised inflation in the UK to fall to 1.9%, below the bank’s 2% target, from 2.2% prior. If seen, GBP looks vulnerable to a fresh push lower as traders cement rate-cut expectations. Following today's weak wages data, a fuller sell off is likely if we get a downside surprise tomorrow, which should bolster the chances of a further cut in December. Given the less-dovish outlook for the Fed, GBPUSD risks are skewed to the downside near-term.

Technical Views

GBPUSD

For now, the correction lower in GBPUSD has stalled into the 1.30 level support, just above the bull trend line. While this area holds, focus is on a recovery higher and a continuation of the bull trend. If we break back below this level however, 1.2832 will be next support to watch.