The Pound is hiring
Posted on November 11, 2009 by Yohay
Filed Under Forex News | 8 Comments
Fresh employment figures in Britain showed that the unemployment rate is falling and that the rise in the number of claims is falling. The British Pound reacts with a cautious rise, still overshadowed by Fitch. What’s next for the Pound?
Update 11:00 GMT: Mervyn King is talking about a “Clear Need For Credible Fiscal Reduction Plan”, adds to the negative sentiment by Fitch, and sends the Pound down.
The data
Britain’s unemployment rate went down from 7.9% to 7.8% in September. Economists were expecting a rise to 8%. Well, they were expecting it in the past three months, and it didn’t happen. This time, it even went down.
Also the more recent indicator exceeded expectations: Claimant Count Change, which is the earliest employment indicator in Britain shows the change in the number of people that request unemployment related benefits.
October’s number was expected to grow by 20K, and it was only 12.9K, getting close to the stage were less people will ask for unemployment benefits. 12.9K is the lowest figure in 18 months.
Fitch weighing on the Pound
Earlier this week, the Pound finally broke the 1.67 resistance line, and even reached 1.6843. This was a major resistance line, that held the Pound back in the past three months. It was swept on general dollar weakness, that finally pushed cable.
It then lost a significant part of the gains due to rating downgrade warning by Fitch. The ongoing interventions in banks and the money for the quantitative easing plans (although it could be worse) are weighing on the British government’s budget.
The British government is working hard to revive the economy that is suffering from an ongoing recession, but these efforts might be too strong for Fitch.
The huge deficit in the budget caused Fitch to issue the warning. This credit warning sent GBP/USD 150 pips down instantly: from 1.6750 before the release to 1.6600 immediately after it.
It then recovered all the way back to the area of 1.6750 before the release of the employment figures.
GBP/USD Technical Forecast
Looking up, the next significant technical barrier is 1.7042, the year-to-date peak made in August. Above that, 1.7440 is the next resistance line,. It served as a support line in September 2008, when the Pound was tumbling down.
If traders aren’t convinced by these figures, the immediate support line is 1.67, which was the previous resistance line, now broken. Below that, major support can be found at 1.6110.
For more on the British Pound, read the weekly GBP/USD forecast.
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