The British pound fell by 0.30% following today's UK jobs report, but has recovered most of its losses. In European trading, GBP/USD rose 0.05% to trade at 1.2452.
UK employment growth slows, unemployment rate rises
UK employment data was weaker than expected. Employment growth took a big hit in the three months to February, with a decline of 156,000 jobs, following a decline of 21,000 in the previous quarter. The market forecast of 110,000 new employees was hardly achieved. The unemployment rate also rose to 4.2% in the three months to February, up from 4% in January and the highest level since mid-2023.
The weak employment data shows that the labor market has cooled due to the prolonged “long-term interest rate policy'' in which the Bank of England has kept the cash rate unchanged at 5.25%. However, the employment report also showed that wage growth remained high, falling to 6.0% in the three months to February from 6.1% in the previous period.
This puts the BoE in a tight spot, as the labor market has cooled but wage growth, the driver of inflation, remains sluggish. The Bank of England is under pressure to help rescue the private sector by cutting interest rates, but worries that cutting rates too soon could lead to a rebound in inflation.
Markets expect the Bank of England to pause at its May meeting, with the possibility of a first rate cut in June. The central bank's decision will depend on data, and Wednesday's inflation report will also be part of that decision. Inflation is expected to be 3.1% year-on-year in March, down from 3.4% in February.
GBP/USD Technical
- GBP/USD previously tested support at 1.2421. Below, 1.2397 is supported.
- There is resistance at 1.2460 and 1.2484
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