UK Data (9/17) Jobs and BoE Minutes; EUR/GBP Update

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UK Data (9/17) Jobs and BoE Minutes; EUR/GBP Update

We got some UK data during the 9/17 European session mostly regarding the labor market. We also got the BoE meeting minutes for the Sept. 4 decision.

UK Average Earnings Index 3m/y (July): 0.6%
Forecast: 0.5%
June: -0.1% (revised from -0.2%)

Claimant Count Change (August): -37.2K
Forecast: -29.7K
July: -37.4K (revised from -33.6K)
claimant count 9/17

(click to enlarge; source: forexfactory.com)

Unemployment Rate (July): 6.2%
Forecast: 6.3%
July: 6.4%
unemployment rate uk 9/17

(click to enlarge; source: forexfactory.com)

Today’s labor market data points were better than the average forecasts. The BoE addressed lack of wage growth as a concern, but July data showed a strong 0.6% gain.Claimant count change showed more people getting off unemployment benefits in August than expected, a good sign for the labor market. The July data was revised to a much better reading as well. Finally, unemployment rated in July dropped faster than expected to 6.2% to a 6-year low.

The Monetary Policy Committee of the BoE voted unanimously to keep the current pace of bond purchases of 375B pound. The vote for interest rate was slightly split, with 7 votes for maintaining at 0.50%, and 2 votes for an increase to 0.75%. These two were Martin Wheele and Ian McCafferty.

Today’s data can be interpreted as sterling-bullish because the jobs data suggests the MPC should raise rates early next year. Let’s take a look at the EUR/GBP.

We also got inflation data from the eurozone. The finalized CPI y/y for August was revised to 0.4% instead of the previous estimates of 0.3%. Generally, this is a Euro-positive surprise, but not nearly close to the 2.0% target set by the ECB.

EUR/GBP was bullish to start the week, breaking above a consolidation range. However, price stalled at the 0.8010 pivot and fell sharply, invalidating the earlier breakout, and actually turning bearish. The failed bullish attempt is a bearish signal, and now after the UK  and eurozone data, EUR/GBP is making new lows on the week.

EUR/GBP 4H Chart 9/17
eurgbp 4h chart 9/17

(click to enlarge)

The 4H chart shows the market now pushing at a September trendline. A break below 0.7930 should clear this support and the EUR/GBP would be poised to test the 0.7891 low, with downside risk to 0.7874, the July and 2014-low as well.

We also got the Scottish independence vote today, so we should see EUR/GBP shake up. For now, the technical outlook seems to be bearish, unless price can hold above 0.7930 after a couple sessions of expected volatility.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.