• Britain's unemployment rate for June and jobless claims for July will likely remain upbeat. 
  • The UK's labor market has been holding up thanks to the government's successful furlough scheme.
  • GBP.USD has room to extend the BOE-fueled gains. 

Pandemic, what pandemic? That may the reaction for anyone looking at the UK's unemployment rate – a remarkable 3.9% in May, deep into the crisis and no different than January, when Brexit was all the rage. 

Britain has had its share of suffering from COVID-19 – with one of the world's highest death rates and a near-death experience for Prime Minister Boris Johnson. Nevertheless, the economic response has been far better than the health one.

The jewel in the crown is the government's furlough scheme – paying workers most of their salaries while they are unable to work. Another program supports small businesses and has been hailed as efficient and effective

Economists expect June's jobless rate to remain at 3.9%, and after three months of positive surprises, that makes perfect sense. 

If Britain's official unemployment rate remains depressed, it would support the pound. An increase to 4% would likely be shrugged off, while only 4.1% or higher – returning to levels seen in 2018 – would be worrying.

The second significant statistic is Claimant Count Change which is for July, a more recent figure shot above one million in April and hit around half a million in May. That was far above the double-digit fluctuations seen in the pre-pandemic era.

However, after these two terrible months, applications dropped by 28,1000 in June. The ongoing gradual reopening in July has likely pushed claims lower despite the hiccups in Leicester and later Manchester and other areas. 

It would take a substantial increase in monthly applications to send sterling lower. 

Average earnings are set to remain at low levels. Including bonuses, wages are projected to have dropped by 0.8% in June, worse than -0.3% in May. Excluding them, a meager growth rate of 0.4% is forecast, down from 0.7% previously. 

Nevertheless, disregarding salaries is one of the changes that coronavirus has brought to the market reaction to the jobs report. The focus is on jobs that depend on the virus – wages and inflation have lost their importance. 

GBP/USD bias and reactions

While the BOE said that risks are skewed to the downside, it upgraded 2020 growth forecasts from the abyss of -14% to a more reasonable -9.5%. It also pointed to robust high-frequency data Andrew Bailey, Governor of the Bank of England, stressed that setting negative rates is not currently on the cards. 

More BOE Quick Analysis: Three pound-positive on Super Thursday open door to new highs

The dollar remains on the back foot amid a stuttering US economy, hit hard by COVID-19 and politicians' feet-dragging on the next fiscal stimulus. 

An upbeat or an employment report that meets expectations could continue supporting the pound. The wind is blowing in favor of sterling after the Bank of England painted a relatively rosy picture.  A truly horrible report – potentially a mix of a leap in June's unemployment rate and a surge in July's claims is needed to change the picture. 

Conclusion

The UK's upcoming labor figures will likely remain robust thanks to the government's largesse – the furlough scheme is set to run through at least October. The pound needs only minor support to continue rising after the boost from the BOE. 

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended Content


Recommended Content

Editors’ Picks

AUD/USD declines below 0.6700 amid weak Aussie Retail Sales, China’s covid protests

AUD/USD declines below 0.6700 amid weak Aussie Retail Sales, China’s covid protests

AUD/USD is extending its decline below 0.6700, undermined by a resurgent safe-haven demand for the US Dollar amid a risk-off theme at the start of the week. China's covid protests and weak Australian Retail Sales add to the weight on the Aussie. 

AUDUSD News

EUR/USD tumbles toward 1.0300 amid risk aversion

EUR/USD tumbles toward 1.0300 amid risk aversion

EUR/USD is falling hard toward 1.0300 after kicking off the week’s trading with a downside gap, as the risk-off mood underpins the US Dollar’s demand during Monday’s Asian session. The downbeat comments from ECB  policymaker Makhlouf exert bearish pressure on the Euro. 

EUR/USD News

Gold snaps four-day uptrend below $1,750 as covid woes sour sentiment

Gold snaps four-day uptrend below $1,750 as covid woes sour sentiment

Gold price drops for the first time in five days while printing sizeable losses below $1,750 during early Monday. The yellow metal bears the burden of the market’s sour sentiment, amid intensifying Chinese covid woes, ahead of important data due later this week.

Gold News

Binance Coin: Two things need to happen for BNB to hit $450

Binance Coin: Two things need to happen for BNB to hit $450

Binance Coin price could be running out of gas to continue its massive rally. While the last five days have been exciting times for holders, the following days will need to be closely monitored. The threat of a downswing looms for BNB.

Read more

Week Ahead: Decisive week for the Dollar as PCE inflation and NFP reports coming up

Week Ahead: Decisive week for the Dollar as PCE inflation and NFP reports coming up

After the Thanksgiving downtime that generated some further weakness for the greenback, investors will be looking for fresh direction from the barrage of US economic data that will be dominating the agenda in the coming week.

Read more

Majors

Cryptocurrencies

Signatures