UK Unemployment Drops Again

The latest data from the UK today has helped lift the British Pound further as optimism continues to support GBP. The Office for National Statistics reported that the UK unemployment rate fell again last month, with the number of UK workers joining the payroll increasing for the fourth consecutive month. The unemployment rate now sits at 4.8%, down from 4.9% a month prior and down from 5.1% at the peak of the labour market crisis in December 2020.

The data also showed that the claimant count fell by over 15k over the month, in stark contrast to the more than 25k gain forecast. The shift likely reflects the growing optimism among employers ahead of the increased reopening which took place over April and has continued this month. With large swathes of the UK economy reopening, employers have been on a hiring spree, reflected in this data. This theme is likely to continue as the country moves closer to the government’s June 21st date for removing social distancing requirements and ending lockdown altogether.

UK Inflation Expectations Rising

Sentiment towards the Pound has been improving steadily over recent months. With the government’s vaccination program continuing to make strong progress and the reopening progressing according to schedule, the country is fully expecting to see the 21st date honoured. In light of this, we have seen UK inflation expectations rising, reflected in firmer yields and a firmer currency. While the BOE has downplayed the upside risks in the economy, continue to point out the remaining uncertainty in the outlook, many traders are looking for GBP to continue to rise over the coming months as the boom in economic activity over the early summer brings the question of BOE tapering into focus.

Last week, data showed the UK’s GDP contraction over Q1 was not as bad as expected, at -1.5%. With the BOE and IMF having upgraded the UK’s economic growth forecast for the year ahead,there is plenty of room for GBP to continue higher in the near term if the data continues to support.

Technical Views

GBPUSD

The rally in GBPUSD has seen price breaking back into the bull channel with price fast approaching the 2021 highs around 1.4248. With the MACD and RSI both firmly bullish, bulls will be looking for a break higher here targeting the 1.4369 level next. To the downside, 1.3997 remains the key support to note.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 65% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.