UK unemployment rate hit a 48-year low-Good news for the British economy, Sterling slides higher
The GBP/USD is holding higher after the UK unemployment rate hit a 48-year low. This is good news for the British economy, as it indicates that more people are finding work and that businesses are doing well. The low unemployment rate is also likely to lead to higher wages and more consumer spending, which will further boost the economy.
UK’s unemployment rate currently stands at a deficient 3.6%, a level not seen since 1974. It indicates a resilient job market where more individuals are finding employment opportunities. It paints a picture of a robust economy with flourishing businesses, which is crucial for economic growth.
- As of right now, cable is up 0.4% to 1.1720 levels.
The more positive risk mood is helping the pound as it stays in the hunt for a third straight day of gains against the dollar. The UK labour market report earlier saw the unemployment rate fall to 3.6% – its lowest since 1974. That is helping cable find a bit of a lift towards the 38.2 Fib retracement level at 1.1737. That will be a notable resistance point before 1.1800 with the US CPI data in focus today.
As much as the fall in the jobless rate is a positive takeaway, UK pay growth continues to fall rather sharply and is something that warrants attention as inflation grips the economy.
Technical Analysis and Challenges Ahead:
From a technical perspective, there is potential for a correction higher in the GBP/USD exchange rate. However, this could also invite more short positions, especially if the pair approaches the key trendline resistance near 1.2000. Before reaching this critical level, buyers will need to overcome resistance at 1.1800 and various Fibonacci retracement levels.
That said, the Fed is also sitting in the same boat and has more leeway and leverage to work with as compared to the BOE. That will continue to keep a bit of policy divergence – or at least the potential for it – pressure on the outlook for cable.
From a technical perspective, there could be scope for a correction higher now, but I think that would invite more short positions to follow, especially if we move closer to the key trendline resistance (white line) near 1.2000. But first, buyers will also have to get past 1.1800 and some notable Fib levels, as seen in the chart above.
UK's record-low unemployment rate is a reason for celebration, indicating economic strength and resilience. However, questions linger about wage growth and inflation. As the pound experiences an uptick in value, market watchers will closely observe how these dynamics evolve and shape the UK's economic future.
