Though the detractors and pundits decried the results of the Brexit referendum last year, the UK economy's overall trajectory remains positive, as evidenced by positive job creation momentum. Figures reported earlier by the Office for National Statistics showed that the unemployment rate reached a fresh 42-year low of 4.40% for the three months ended in June. Adding to the overall sense of optimism was the pickup in wage growth, with average hourly earnings plus bonus climbing by 2.10% in June alongside a revision higher in the prior month’s figure to 1.90%.
Overall, the economy added 125,000 during the second quarter bringing the aggregate employment rate to 75.10%, marking the highest figure ever reached since record-keeping began in 1971. However, despite the overwhelming optimism surrounding the results, there were some areas that may concern Bank of England policymakers with the September Monetary Policy Committee less than one month away.
The main emerging problem is that gains in income and wages continue to be outpaced by consumer price inflation. Data released on Tuesday revealed that both headline and core consumer prices continue to outpace annualized growth in average earnings plus bonus figure. While energy prices are retreating, climbing food and clothing costs contributed to inflation remaining above the 2.00% level targeted by policymakers. This means that price inflation continues to erode wage gains and shrink consumers’ overall disposable income.
The Bank of England is unlikely to raise rates in the foreseeable future owing to the uncertainty surrounding Brexit negotiations in a development that could contribute to more tepid growth during the second half of 2017. Despite the problems associated with high inflation, market participants largely ignored the development, keeping the GBPUSD pair bid even amid recent US dollar strength. With an equidistant channel formation emerging, GBPUSD may continue benefiting from the broad gains in the economy.
Pound Pushes Higher Amid UK Joblessness at 42-Year Lows
Andamento del mercato - 16/08/2017