The Sterling Grows Strong Amid Encouraging Jobs Data

Strong UK labour market data created more demand for the sterling as the GBP/USD reached a few pips away from the 1.55 level. The UK National Statistics Office (NSO) on Wednesday released the ILO Unemployment Rate which revealed a reduction for the three-month period of June until August inclusive by 0.1% to 5.4% compared to the previous month. The encouraging news came as a surprise to the markets given that analysts were expecting the unemployment rate to remain stable at 5.5%.

According to the NSO, the unemployment data reached the lowest level of the last seven years. The number of people within the work force being left without a job, at the three-month period ended in August, fell by 79,000 to 1.77 million compared to the previous quarter. Moreover, the number of people who managed to get a job within the June-August quarter was 140,000, and hence the percentage of employed people increased to its highest level (73.6%) since the beginning of the data time range back in 1971. Compared with the same three-month period of 2014, the number of people employed rose by 291,000, while part-time workers also increased by 0.8% to 8.35 million.

For the same three-month period, employees’ wages (including bonuses) increased by 3% compared to a the same period last year, although the increase was marginally below the expected rate of 3.1%. Excluding bonuses, employees’ wages for the same period increased by 2.8% and also missed expectations for a 3% increase compared to the previous year’s June-August quarter.

Although UK employment news were clearly encouraging, the same cannot be said about the nation’s inflation levels. According to an earlier report released on Tuesday by the NSO, the Consumer Price Index (CPI) for the month of September turned negative (-0.1%) and disappointed the markets who were expecting the index to at least fall to 0% increase.

Last week’s performance of the GBP/USD was a mixed bag and traders were undecided on whether the currency pair would remain in an upwards or downwards trend. Tuesday’s disappointing UK inflation news kept investors hesitant on buying the GBP/USD and so the pair’s rate on that day fell by 0.5% to 1.52533. The next day was however a different story, as there was increased demand given the encouraging employment data, and the currency pair surged by a massive 1.5% and ended the day’s trading at 1.54756. On a weekly basis, the pair also increased by 0.8%.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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