Weak UK wage data weighing on GBP

GBPUSD, 240 min 

UK unemployment unexpectedly dropped to a new cycle low of 5.3% in September data, down from 5.4% in August and July’s 5.5%. The consensus had been for an unchanged 5.4% reading. This takes the jobless rate further south of the BoE’s NAIRU (non-accelerating inflation rate of unemployment) threshold of 5.5%. The employment rate, meanwhile, rose to 73.7% the highest since records began in 1971.

Despite this, wage data disappointed: the ex-bonus average household pay packet rose 2.5% y/y in the three months to September, down from the 2.8% increase of August, while the with-bonus figure rose 3.0% y/y, unchanged from August and shy of the median forecast for 3.2%. The weaker wage data has been the main takeaway for markets, with sterling trading weaker in the wake of the release, though with inflation fractionally negative, incomes continue to trend firmly upwards in real terms. The October claimant count has been somewhat overshadowed on this occasion, coming in with a rise of 3.3k, slightly worse than the 1.4k median forecast. The claimant count rate remained unchanged at 2.3%.

GBPUSD is trading just above the 23.6% Fibonacci retracement level after it reacted lower from the proximity of 1.5197 resistance level. It is trading near the upper 4h Bollinger Bands while the 30 period SMA and a consolidation from yesterday appears to give some support. Even though the market turned lower before hitting my intended shorting level I am still looking for short signals at or near 1.1597 resistance (coincides with 38.2% Fibonacci level) with an aim to cover the trade near 1.5060 level.