When is the UK Jobs Report and how could it affect GBP/USD?
UK Jobs Report OverviewThe United Kingdom (UK) docket has the labor market report to be released by the Office for National Statistics (ONS) on Tuesday, later this session at 06:00 GMT.
UK Claimant Count Change for August is expected to rise by 20.3K, reflecting the number of people claiming jobless benefits. The reading was -6.2K in July. Meanwhile, the Claimant Count Rate was at 4.4% in the previous month.
UK Average Earnings, including bonuses, in the three months to July, are expected to accelerate by 4.7%, following 4.6% prior, while ex-bonuses, the wages are expected to rise by 4.8% against the previous 5.0%.
UK ILO Unemployment Rate (3M) may remain consistent at 4.7% in the three months to July.
How could the UK Jobs Report affect GBP/USD?The UK jobs report may take a backseat as traders shift focus to Wednesday’s Consumer Price Index (CPI) and Retail Price Index releases. The Pound Sterling (GBP) draws support against its peers from cautious sentiment surrounding the Bank of England (BoE) to hold interest rates steady at 4% in the monetary policy meeting on Thursday.
The GBP/USD pair remains stronger above 1.3600 as the US Dollar (USD) weakens due to the firm likelihood of the US Federal Reserve (Fed) lowering rates by 25 basis points at its September meeting due on Wednesday. Traders will likely be watching the US Retail Sales for August on Tuesday.
Technically, the GBP/USD pair may appreciate toward its initial barrier at 1.3788, the highest since October 2021. On the downside, the primary support lies at the nine-day Exponential Moving Average (EMA) of 1.3555, followed by the 50-day EMA at 1.3485.
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
Why is wage growth important?The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
How much do central banks care about employment?The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
