Euro trims some losses as British Pound falls following UK employment data

EUR/GBP bounces up to 0.8560 but remains vulnerable, following a 0.5% decline over the previous two days.
The Pound weakened following the release of mixed UK employment figures.
The BoE has decided to stop selling long-dated securities amid the global bond market turmoil.

Guillermo Alcala FXStreet

The Euro (EUR) posts minor gains on Tuesday as the British Pound (GBP) falls after mixed UK employment data. The Euro trades in the 0.8560 area at the time of writing, but remains close to the two-week lows, at 0.8552, hit early in the day, following a nearly 0.5% decline in the previous two trading days.

Data released by the UK National Statistics Office on Tuesday revealed that the ILO Unemployment Rate remained steady at 4.9% in the three months to July, against expectations of an uptick to 5%. Jobless claimants, on the other hand, have increased by 27.8K, more than three times the 8,3K increase expected and following a 11.8K drop in the previous month.

All eyes are on the BoE monetary policy decisions

The UK calendar is busy this week, with August inflation data on Wednesday, and the highlight of the week, the Bank of England’s (BoE) monetary policy decision, on Thursday.

The BoE is widely expected to leave interest rates unchanged, following Governor Bailley’s comments pushing back against the theory that interest rate hikes are “inevitable” at the UK Parliament last week. The bank’s committee, however, is highly likely to show a split vote, and investors will look at the number of dissenters to assess the chances of upcoming rate hikes.

Earlier on Tuesday, a report by The Telegraph newspaper revealed that the BoE plans to overhaul its bond-selling program and stop selling 20- and 30-year yields, which are boosting the UK’s borrowing costs amid the global bond market turmoil.

In the Eurozone. data released on Tuesday shows that the French Consumer Price Index (CPI) moderated in August, while Spain’s consumer inflation accelerated at its fastest year-over-year pace in the last three years. Later in the day, the German ZEW Economic Sentiment Index and July’s Eurozone Trade Balance data will complete the calendar.

Economic Indicator

ILO Unemployment Rate (3M)

The ILO Unemployment Rate released by the UK Office for National Statistics is the number of unemployed workers divided by the total civilian labor force. It is a leading indicator for the UK Economy. If the rate goes up, it indicates a lack of expansion within the UK labor market. As a result, a rise leads to a weakening of the UK economy. Generally, a decrease of the figure is seen as bullish for the Pound Sterling (GBP), while an increase is seen as bearish.

Why it matters to traders?

The Unemployment Rate is the broadest indicator of Britain’s labor market. The figure is highlighted by the broad media, beyond the financial sector, giving the publication a more significant impact despite its late publication. It is released around six weeks after the month ends. While the Bank of England is tasked with maintaining price stability, there is a substantial inverse correlation between unemployment and inflation. A higher than expected figure tends to be GBP-bearish.

Economic Indicator

Claimant Count Rate

The Claimant Count Rate released by the UK Office for National Statistics is a monthly measure of the number of benefit claimants as a percentage of the working population excluding homemakers and those on training schemes. It indicates the health of the UK labor market. If the rate rises, it indicates a greater share of the populace is claiming benefits which suggests a lack of expansion within the UK labor market. A fall in the rate can indicate economic expansion and potential inflationary pressures. Generally, a decrease of the figure is seen as bullish for the Pound Sterling (GBP), while an increase is seen as bearish.

Why it matters to traders?

The change in the number of those claiming jobless benefits is an early gauge of the UK’s labor market. The figures are released for the previous month, contrary to the Unemployment Rate, which is for the prior one. This release is scheduled around the middle of the month. An increase in applications is a sign of a worsening economic situation and implies looser monetary policy, while a decrease indicates improving conditions. A higher-than-expected outcome tends to be GBP-bearish.

Author

Guillermo Alcala

FXStreet

Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.

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