Forecasters Optimistic About UK Jobs

After GDP came in line with expectations and industrial production above, the UK is anticipated to get another set of good news from jobs.

The End in Sight?

The Chancellor of the Exchequer, Jeremy Hunt, has had a good few days with a series of positive news items. However, it might not be enough to convince the IMF to upgrade their outlook for the country, as the UK is seen as the only major economy to have negative growth this year. UK preliminary GDP figures for the first quarter were in line with expectations of barely perceptible growth, despite the government cutting spending by 2.5%. Chancellor Hunt vowed to continue the current policies until "the job is done".

The next question is how the data will influence the BOE, which has reluctantly raised rates for over a year. Better economic performance and industrial production could be seen as opening the door for more tightening. But others can argue that the slow pace of rate hikes helped to prevent worse economic conditions. The 7-2 vote at the latest BOE meeting suggests that there hasn't been much change of opinion, and unless inflation comes down meaningfully, the central bank could keep plodding on in the current direction.

What Lies Ahead

Whenever better results are forecast, it opens the door to disappointment. UK industrial production recently surprised to the upside, but that was partly thanks to analysts' pessimistic forecast. Now, forecasters are more optimistic about the job numbers, expecting the claimant count number to drop 15k from the 28.2K increase last time. Remember that the smaller the number of people seeking unemployment benefits, the better it is for the perception of the economy. The unemployment rate is expected to remain steady at 3.8%.

Average earnings are expected to grow at a slightly reduced pace of 5.7% compared to 5.9%, which is the bigger concern for the BOE. The labour cost has not increased nearly as much as the inflation rate, which has dissatisfied workers and engendered strikes across the country. But it does provide a positive sign for the BOE that inflation isn't spiralling out of control, reducing the pressure for even bigger rate hikes.

Cable Ended Trend for Now?

Cable seems to have put a high in following the successful completion of a wedge pattern by $1.2680. Losing $1.2438, the first out of two troughs will expose $1.24 and perhaps $1.2347 and riks ending the upward trend. Conversely, if bulls can recapture $1.2586, we could see another attempt at the top, either for a double-top formation or a continuation toward $1.27.

Source: SpreadX / GBPUSD

Key Takeaways

The UK is expected to receive positive news on job numbers, with forecasters more optimistic, while average earnings are expected to grow at a slightly reduced pace. The labour cost has not increased as much as the inflation rate, which is a positive sign for the BOE.