When are the UK wages and how could they affect GBP/USD?

Dhwani Mehta FXStreet

UK Jobs report overview

The UK labor market report is expected to show that the average weekly earnings, including bonuses, in the three months to August, are expected to decelerate to 2.4%, while ex-bonuses also, the wages are seen lower at 2.8% in the reported period versus 2.9% last.

The number of people seeking jobless benefits is likely to have increased by 10.0k in the three months to September, compared to a rise of 8.7k seen in the three months to August. The ILO unemployment rate is expected to hold steady at multi-decade lows of 4.0% during the period.

How could they affect GBP/USD?

A bigger-than-expected drop in the UK’s wages could trigger fresh selling the pound amid looming Brexit uncertainty, in the wake of the Irish border deadlock. The rates could test 1.3150/46 (5-DMA/ daily pivot) on downbeat numbers. A break above the last, a test of the 20-DMA support at 1.3105 remains inevitable.

On a positive surprise, the GBP/USD pair could extend the bounce to test the 1.3200 level, above which the immediate resistances lie at 1.3249/59 (Oct 11^th& 12^th high) and 1.3270 (daily classic R3).

“According to the UK report on jobs, the labor market conditions remain tight with starting salaries rising sharply amid a steep reduction in candidate supply and vacancy growth softening to nearly two-year low, the IHS/Markit survey showed on October 5. These conditions point to solid wage growth in the UK, but the regular pay (excluding bonuses) is expected to decelerate to 2.8% y/y in three months to August while total pay (including bonuses) is expected to decelerate at the same time to 2.4% y/y. Any softening below the current rate of market expectations is likely to add pressure on Sterling that rose last week slightly backed by Brexit deal hopes and expectations of the gradual rate hike path”, Mario Blascak (PhD), Editor-in-Chief at FXStreet explains.

Key Notes

GBP/USD struggling to maintain the course to 1.3200 with UK earnings expected to decline

Market themes of the Day: UK wages and German investors sentiment are both expected to decelerate

GBP/USD Forecast: Sideways consolidation around mid-1.3100s ahead of UK employment details

About UK jobs

The UK Average Earnings released by the Office for National Statistics (ONS) is a key short-term indicator of how levels of pay are changing within the UK economy. Generally speaking, the positive earnings growth anticipates positive (or bullish) for the GBP, whereas a low reading is seen as negative (or bearish).

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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