UK’s Unemployment Rises, US Inflation Numbers On The Radar

UK’s Employment

This morning the United Kingdom released its jobs numbers for the month of August. The initial forecast for the unemployment rate was for a rise from +4.1% to +4.3%, but the actual number came out at +4.5, which is a big disappointment for UK. We can see from the chart below that this number started increasing rapidly, suggesting that the country’s labour market is feeling the effects of the pandemic. Average earnings including bonuses showed up slightly better than its forecast. The figure came out at 0.0%, when the expectation was for a -0.6%. Certainly, the UK jobs number is one of the economic indicators that the BoE is currently keeping an eye on, as the country battles the coronavirus pandemic. As we already know, the BoE is exploring the option of introducing a negative interest rate, if the economic situation deteriorates further. Because there is still a lot of uncertainty with regards to Brexit and the final deal, Britain already started making trade deals with some non-EU members. Negative interest rates might help the country’s exports become slightly more attractive on the global arena, as the British pound would become weaker against its major counterparts. Certainly, borrowing costs inside the country would be lower, which may help stimulate the economy. However, that might be a short-term benefit, if the overall economy turns south, causing issues in the financial sector. Banks may slow down their lending and the consumer could hold on to physical cash, instead of depositing it into savings accounts. So that’s why the Bank of England is at no rush at all, for now, to introduce negative rates, until it believes it would become a necessary measure to take.

GBP/USD — Technical Outlook

At the end of last week, GBP/USD managed to push above the psychological 1.3000 barrier and since then it continues to trade there. Also, the pair continues to balance above a short-term tentative upside support line taken from the low of September 25 th. We will take a positive approach for now and aim for slightly higher areas.

US Inflation Figures

Another set of economic data, which we will monitor, will be the US inflation readings for September as well. The numbers released will be both, core and headline on a MoM and YoY basis. The MoM core and headline readings have the same forecast, where both are believed to have declined slightly from +0.4% to +0.2%. On the other hand, the YoY core and headline figures are expected to rise a bit. The core one is forecasted to go from +1.7% to +1.8% and the headline is believed to move from +1.3% to +1.4%. The core inflation numbers exclude food and energy prices. Let us remind the readers, that at the latest FOMC meeting, the committee changed its language in regards to inflation, where they have stated that: “will aim to achieve inflation moderately above 2% for some time so that inflation averages 2% over time”. If the readings come out better than expected, that would work well towards the Fed’s inflation target of average 2% over time. This might also push the Fed towards raising rates sooner, rather than later.

USD/CHF — Technical Outlook

As we can see from the technical picture of USD/CHF on our 4-hour chart, the pair continues to trade near the lower bound of the short-term falling channel. As long as the rate remains withing the boundaries of that channel, the near-term outlook could stay negative.

As For The Rest Of Today’s Events

Today oil traders will keep an eye on the release of OPEC’s monthly oil market report. The report covers the main issues, which are currently affecting the global oil market and also provides an outlook for the upcoming year. The report can be useful for those, who are looking for longer term trades in oil, as it looks at key developments, which are impacting and could impact the trends of demand and supply.



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