UK jobs report preview: With Brexit on the back burner, upbeat wages could lift the pound

The UK publishes its Unemployment Rate and Average Earnings data for February and the Claimant Count Change for March on Tuesday, April 16h, at 8:30 GMT.

Upbeat jobs market, no change expected 

The British labor market is doing quite well. The jobless rate dropped to 3.9% in January, with record employment. Wages grew at a satisfactory standard of 3.4%, including and excluding bonuses. 

The concern stems from the Claimant Count Change, or jobless claims, which have been on the rise for quite some time. They jumped by a disappointing 27K in February. Despite recent increases in those seeking work, the labor market remains robust.

Similar figures are expected now: the jobless rate is projected to remain unchanged at 3.9%. Salaries including bonuses are forecast to accelerate to 3.5% and excluding bonuses to stay at 3.4%. 

As these figures are great, minor disappointments will probably be brushed off.

A similar positive bias is on the cards for claims, but for a different reason. As expectations are low, for another increase of 20K, the same level as last month's 27K would not be a shocker, and a smaller rise would serve as good news.

All in all, it would take substantial shortcomings in all the data to adversely impact the pound, looking at the data alone.

But the data is never isolated from the bigger picture.

Brexit breather and risk-on sentiment

The figures are released after the European Union granted a six-month extension to Article 50, delaying Brexit until Halloween. The decision came after long weeks in which the deadline for Brexit was close and as the default option was a no-deal exit. 

The postponement has two effects. First, it allows the data to move markets. The numbers, good or bad, had a limited and short-lived impact on Sterling. The focus swiftly shifted back to Brexit. But now, it could have a more significant impact as the Bank of England may have a closer look at the data.

And secondly, while uncertainty remains high, Brexit is not imminent and this supports the pound. Talks between the government and the opposition continue despite the differences. Therefore, an OK report comes amid better conditions for the pound.

And looking to the other side of the equation, the US Dollar is now on the back foot due to separate negotiations. The US and China have made progress in trade talks, and there are even reports that the US made concessions regarding government intervention, moves made to facilitate clinching an accord. The development has underpinned the risk-on mood, which weakens the safe-haven US Dollar.

Conclusion

It would take a genuinely miserable jobs report to weigh on the pound. With Brexit temporarily out of the way and an improved market mood, the scales seem tilted in favor of GBP/USD. So, an OK report has room to lift GBP/USD.