Rise in UK Unemployment

Rise in UK Unemployment

GBP slipped against both the EUR and USD following the UK's unexpected uptick in unemployment, though its decline will likely be tempered by robust wage growth, fostering a cautious stance at the Bank of England (BoE).  GBP weakened as the Office for National Statistics revealed a rise in the UK's unemployment rate to 4.2% in February, surpassing market expectations of 4.0%.

Meanwhile, the significant average earnings metric, including bonuses, remained steady at 5.6% in February, exceeding market projections of 5.5%. Excluding bonuses, average earnings saw a slight dip to 6.0% from the previous month's 6.1%, yet still outpaced market forecasts of 5.8%.

Former BoE Monetary Policy Committee member Andrew Sentance suggests that UK regular pay growth continues to exceed levels "well above" the 3-4% range typically associated with 2% inflation.  Sentance notes, "Pay growth has only decreased by less than 2 percentage points from its peak of 7.9% last year. There is still a significant distance to cover before wage increases return to a sustainable pace."

The USD may receive another lift as US industrial production data is expected tonight.  After a 0.1% rise in February, headline industrial output is projected to climb by 0.4% month-on-month in March.  Core manufacturing likely expanded by 0.3% during the month, with an increase also anticipated in vehicle output.

Following a notable decline in February, it's anticipated that utilities will rebound. However, mining activity likely decreased throughout the month, primarily driven by a significant drop in coal production.  The USD has attained record highs amid diminishing expectations of Federal Reserve easing – this trend could persist, further bolstering the currency.

 

Please note:  The news and information contained on this site should not be interpreted as advice or as a solicitation to offer to convert any currency or as a recommendation to trade.

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