UK: Lowest Jobless Rate since 1973


EURGBP, H1 and H4

BoE MPC member Broadbent said “I am not ready” to hike rates in an interview with Scotland’s Press and Journal. This follows on from his speech yesterday, where he avoided directly addressing monetary policy but spoke in some detail about the risks that a hard Brexit scenario would pose the UK economy (reducing imports and raising costs, he argued). Broadbent said that it is a bit “tricky at the moment” to make a decision on hiking rates. He said that the mood among businesses was central to his analysis and that it was “very difficult” for the bank’s Monetary Policy Committee to judge if there had been a significant improvement.

In regard to data releases, today we have seen UK unemployment to unexpectedly fall to a 4.5% in May, down from 4.6% in the previous month and making the lowest jobless rate seen since 1973. Average household income data also came in a little better than expected. The report provides some welcome respite after a run of underwhelming data out of the UK, but with headline CPI running at a 2.9% y/y rate, incomes remain in decline in real terms. Sterling lifted by about 25 pips against both the dollar and euro in the wake of the UK labour market report. Wages data also showed a slight improvement. Unemployment is a lagging indicator, and the dip in the headline rate goes against a broad batch of recent data, including more forward-looking surveys, showing a marked deceleration in the UK economy. Wage growth also remains firmly in negative growth, while both S&P and Moody’s, along with BoE MPC member Broadbent, have over the last day issued a salvo of warnings on possible Brexit consequences.

After Sterling’s rally, a Short position was taken for EURGBP, with entry at 0.8892. The EURGBP posted year high at 0.8940, however afterwards a retracement was noticed in the 4-hour chart, with pair trading back lower. Hence Intraday targets were set at 0.8870 which is the 20period moving average, and at 50.0 Fibonacci level i.e, 0.8850. Support set at 0.8930.

Technically wise, RSI is at 60 sloping lower and Stochastic Signal line seem to turn back below the overbought territory in the 4-hour chart. Meanwhile in the 1-hour chart, trend broke the lower Bollinger pattern and Parabolic SAR turned negative for the last 5 sessions.

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Andria Pichidi

Market Analyst

HotForex

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