GBP/USD at Key 1.3000 before Employment Data
Joe Perry January 20, 2020 8:51 PM
This could be the last straw for the MPC if the data is worse.
Tomorrow, the UK will release December’s Claimant Count Change for the month of December. The claimant change count is the number of new people who have applied for unemployment benefits. A higher number than the expectation is bad (more people unemployed) whereas a worse number is good (less people filing for unemployment.) This is different than the headline employment number released in many countries, as most show the number of new jobs added to the economy, not the number of people filing for unemployment claims. Expectations for the claimant count for December are for an increase of 26,000 new claims for unemployment benefits vs 28,800 in November.
In addition, Average Hourly Earnings for November are going to be released. Expectations are for 3.3% vs 3.5% last. Remember that this data is 2 months old, and before the elections, so it should be taken with a grain of salt. However, it is still the most recent employment inflation data we have.
This could be the last straw for the MPC if the data is worse. Inflation data last week was much weaker than expected. Retail Sales data was much weaker than expected. The MPC already has 2 dissenters who wanted to cut rates, and more have spoken recently with a more dovish tone. GBP/USD has been trending lower since the elections. These are all indications the market is looking for a possible cut when the BOE’s Monetary Policy Committee meets again on January 30th.
GBP/USD initially bounced as the exit polls showed Boris Johnson winning in a landslide victory, but the possibility of a hard Brexit and worse data has been helping the Pound move lower. It is currently trading at 1.3000. This has been a key inflection point since mid-October as this level has been used numerous times as both support and resistance. GBP/USD is currently as the apex of a symmetrical triangle going back to election day.
Source: Tradingview, FOREX.com
The employment data will be key for the market and the MPC. If the data is better than expected, GBP/USD could trade higher from 1.3000, as expectations of a rate cut on January 30th may be reduced. However, if the data is worse than expected, the pair may continue to weaken as the expectations of a rate cut will increase.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.