Claimant Count Change, which shows the number of people claiming unemployment benefits in Britian, dropped by 30,900 people. This is the fourth month in a row that such an improvement in employment is seen. Also the unemployment rate fell. GBP/USD is on the rise.
Early expectations stood on a drop of about 23,000 people, and this is a significant surprise. Note that all the drops in the Claimant Count Change in the past four months were stronger than expected. This figure relates to the month of May. And there was another good surprise:
The unemployment rate, which is a lagging figure in the UK (relates to April) finally dropped as well. It unexpectedly dropped from 8% to 7.9%. It was expected to remain unchanged for a third month in a row.
While an improvement in employment wasn’t always Pound-friendly, this time it is: GBP/USD is making a fresh attempt to break the 1.4780 resistance line, after a 30 pip jump after the release.
GBP/USD managed to break the 1.4780 line yesterday, riding on risk appetitive trading all over the world. GBP/USD reached 1.4836 but then fell back down and traded at 1.4760 before the release of the employment figures.
Earlier this week, inflation figures were slightly weaker than expected, easing the pressures to raise the rates to tackle inflation. CPI rose by an annual rate of 3.4%, lower than last month’s 3.7% rise, and lower than 3.5% that was expected. Also Core CPI fell short of early expectations, rising at a rate of 2.9%.
It’s important to note the third release – RPI. The Retail Price Index is still high – 5.1%, showing that consumer inflation is still untamed. The new British Prime Minister, David Cameron, urged the central bank to tackle the rising inflation, and said that the CPI must go down. Mervyn King dismissed it up to now, but unless CPI goes under 3%, which is the government’s target, a chance of a rate hike is still possible.
Another attempt to break above 1.4780 will meet resistance at 1.5050, a line that the pair reached after the recent European turmoil at the beginning of May. Above, 1.5130 was a support line when the Pound was trading higher, and now serves as resistance. It’s followed by 1.5350, which was a pivotal line at the higher range, and then by 1.5530, the highest level in recent months.
Below, 1.4610 provides immediate support. It capped the Pound a few times in recent weeks. It’s followed by 1.45 and 1.44, which was also a line of support in the past. The year-to-date low of 1.4227 is quite far at the moment.
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