The GBP/USD advanced for a third consecutive day on Wednesday, but gains were seen as limited after government data pointed to sluggish wage growth despite another fall in UK unemployment.
Joblessness in the UK fell to a more than seven-year low in September, but disappointing wage growth suggested that interest rates would remain at record lows for a while longer.
The UK’s official unemployment rate fell to 5.3% in the three months to September, down from 5.3% in the June quarter and the lowest level since April 2008, the Office for National Statistics reported on Wednesday.
The number of people out of work fell by 103,000 to 1.75 million in the third quarter, official data showed. The number of people in work surged to 31.21 million, 419,000 more than in the third quarter of last year.
Solid employment gains failed to translate into bigger wage growth. Average earnings rose 2.5% annually in the third quarter, well below the previous three-month period and short of expectations calling for 2.7%. Average pay including bonuses rose 3% annually in the third quarter, compared with forecasts calling for 3.2%.
Sluggish wage growth likely keeps the lid on rate-hike speculation for the time being. Last week the Bank of England said Britain’s near-zero inflation rate is expected to pick up slowly next year, making a rate hike before late-2016 unlikely. The Monetary Policy Committee (MPC) voted 8-1 last week to hold interest rates at 0.5%.
The GBP/USD climbed to a daily high of 1.5197 before backtracking to 1.5186, advancing 65 pips or 0.4%. The GBP/USD is likely to face immediate resistance at the psychological 1.5200 level. On the downside, initial support is likely found at 1.5090.
With Wednesday’s gain, the GBP/USD is back above its 50-day and 200-day simple moving averages. Cable has advanced for three successive sessions after plunging more than 300 pips in the latter half of last week.
European stocks turned higher on Wednesday after a subdued Asian session. London’s FTSE 100 Index climbed 0.5%. Germany’s DAX Index was also up 0.7%.
Commodity prices traded mixed after staging a mild recovery in the previous session. US crude oil futures were down 22 cents or 0.5% at $43.99 a barrel. Brent crude, the international benchmark, traded up 14 cents or 0.3% at $47.58 a barrel.
Meanwhile, gold prices continued to trend lower. Gold for December delivery, the most actively traded contract, slipped $1.70 to $1,086.80 per troy ounce.
Based out of Toronto, Canada, Husni Sam Borji is senior macroeconomics analysts who contributes regularly to TradersDNA, where he examines the global financial markets. Husni Sam has authored dozens of government reports and industry whitepapers, as well as thousands of financial articles. Husni Sam holds a BA from the University of Windsor and a Master’s degree in Economic Public Policy from McMaster University.
His expertise includes macroeconomics, fundamental analysis, industry research and global political economy.