- GBP/JPY moves higher to near 189.00 on the back of upbeat UK labor market data for three months ending February
- The escalating US-China trade war has dampened the global economic outlook.
- Japan’s Ryosei Akazawa is scheduled to visit the US for trade talks.
The GBP/JPY pair rises to near 189.00 in Tuesday’s European session. The pair moves higher as the Pound Sterling (GBP) strengthens after the release of the upbeat United Kingdom (UK) employment data for three months ending February.
The UK Office for National Statistics (ONS) reported that employers hired 206K job-seekers, significantly higher than 144K addition seen in quarter ending January. The ILO Unemployment Rate remained steady at 4.4%, as expected.
Average Earnings Excluding Bonuses, a key measure of wage growth, rose by 5.9%, missing estimates of 6%. In three months ending January, the wage growth measure rose by 5.8%. Theoretically, sticky wage growth and robust employment growth block the way for the Bank of England (BoE) to back monetary policy easing. However, financial market participants are worried about the UK economic and labor market outlook.
The intensifying tariff war between the United States (US) and China is expected to impact global economic growth, assuming that the latter will look for other markets to sell their products.
Meanwhile, an increment in employers’ contributions to National Insurance (NI) from 13.8% to 15%, as announced by Chancellor of the Exchequer Rachel Reeves in the Autumn Budget, has become effective this month. This could force employers to cut down their talent requirements to offset the impact of higher payment towards social security schemes.
In the Asia-Pacific region, investors await trade talks between Washington and Japan, with Japanese Economic Minister Ryosei Akazawa scheduled to visit the US. Ahead of the visit, Akazawa said on Monday, “Our goal is the complete removal of additional US tariffs.” He warned that Trump’s tariffs are already eating away at Japanese firms’ profits day by day.
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.
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