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14 May 2024 | FXGT.com

Rising Unemployment and Persistent Wage Growth Complicate Bank of England Decisions

  • Unemployment Rate: The UK’s unemployment rate slightly increased to 4.3% for the three months ending in March, aligning with market forecasts, and rising from the previous 4.2%.
  • Employment Change: Employment figures for March showed a decline, further illustrating a weakening labour market. The April data also confirmed a continuing negative trend in job creation, although there was a notable upward revision for March’s figures.
  • Wage Growth: Despite the weakening job market, wage pressures persist. Average weekly earnings, including and excluding bonuses, exceeded expectations and showed a year-on-year increase, suggesting that wage inflation remains a concern.
  • Market Reaction: The labour market data did not significantly influence the GBP/USD exchange rate, which remained stable around $1.2550 following the release. The consistency in wage growth amidst a rising unemployment rate presents a mixed signal, potentially complicating the monetary policy outlook for the Bank of England.
  • Implications for Monetary Policy: The current labour market data presents a mixed signal for the Bank of England (BOE), complicating its decision-making process regarding interest rates. While the softening job market might argue for a more dovish stance, the persistent wage growth could pressure the BOE to maintain or even raise interest rates to manage inflationary risks.
  • US Data Focus: Attention is now turning to the US Producer Price Index (PPI) due today. There’s a potential for this data to show higher-than-expected figures, which could strengthen the USD. Additionally, Fed Chair Jerome Powell speech later today could significantly influence market dynamics. These events will likely dictate the short-term trajectory for GBPUSD and broader market sentiment.
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