UK Average Earnings arrives sharply lower at 3.8%, Unemployment Rate remains steady

The United Kingdom (UK) ILO Unemployment Rate remains steady at 5.2 in the three months ending in January, while it was expected to rise to 5.3%, the Office for National Statistics (ONS) reported. During the period, the economy created 84K fresh jobs, higher than the prior release of 52K.

Average Earnings Excluding Bonus, a key measure of wage growth, cools down at a faster-than-expected pace to 3.8% Year-on-Year (YoY), against estimates of 4% and the previous reading of 4.1%, revised lower from 4.2%. The wage growth measure, including bonuses, arrives lower at 3.9% YoY, as expected, against 4.2% in the quarter ending in December.

Market reaction

The Pound Sterling (GBP) has faced significant selling pressure after the data release. GBP/USD gives back its early gains and drops to near 1.3250.

(This section below was published at 06:03 GMT as a preview of the UK labor market data for the three months ending in January)

UK Jobs Report Overview

The United Kingdom (UK) docket has the labor market report to be released by the Office for National Statistics (ONS) on Thursday, later this session at 07:00 GMT.

UK Claimant Count Change for February is expected to ease to 25.8K, reflecting the number of people claiming jobless benefits. The reading was 28.6K in January. Meanwhile, the Claimant Count Rate was at 4.4% in the previous month.

UK Average Earnings, including bonuses, in the three months to January, are expected to accelerate 3.9%, following 4.2% prior, while ex-bonuses, the wages are expected to rise by 4.0% against the previous 4.2%.

UK ILO Unemployment Rate (3M) may tick up to 5.3% in the three months to January, from 5.2% prior. Employment Change showed an increase of 52K in the previous quarter.

How could the UK Jobs Report affect GBP/USD?

GBP/USD may get limited impact if the UK jobs report meets expectations. Traders will likely await the Bank of England’s (BoE) interest rate decision due later in the day. Rising oil prices amid the ongoing Iran conflict have lifted inflation expectations in the United Kingdom and sharply reduced the likelihood of a March rate cut. Prior to the conflict, markets had priced in an 80% chance of a March cut; the vote split will be closely watched, with a 6–3 outcome signaling a more dovish tilt than the expected 7–2 consensus.

The upside of the GBP/USD pair could be restrained as the US Dollar may regain traction amid a more hawkish shift in the Federal Reserve (Fed) outlook. The Fed left interest rates unchanged at 3.50%–3.75% at its March meeting. Chair Jerome Powell noted that while inflation is expected to ease gradually, the pace of disinflation may be slower than previously anticipated. Powell also highlighted that rising oil prices tied to the Iran conflict are likely to push inflation higher in the near term.

Technically, the GBP/USD pair is trading around 1.3270 at the time of writing. Daily chart technical analysis suggests the 14-day Relative Strength Index (RSI) at 38 (neutral) suggests momentum is weaker. The immediate support lies at the three-month low of 1.3218, which was recorded on March 13. On the upside, the pair may find an initial barrier at the nine-day EMA of 1.3323, followed by the 50-day EMA at 1.3445.