The UK labour market appears to have turned a corner. The latest jobs data painted an improved picture. Unemployment unexpectedly declined to 4.8% in the three months to March, down from 4.9% in February and also its third straight monthly decline – an encouraging sign particularly given the UK was still in lockdown.
It would appear that the pandemic hit to the UK jobs market wasn’t as bad as feared. The government’s furlough scheme continues to do some of the heavy lifting. Unemployment will almost certainly rise again in Autumn when the supportive scheme concludes. But that’s then this is now.
The report showed other early signs of recovery such as the number of employees on payrolls rising for a 5th straight month and an unexpected fall in the claimant count.
More data to come…
Looking ahead, there is still plenty of data for the Pound to digest this week, including CPI data tomorrow and retail sales as well as the PMI reports on Friday.
The Pound is benefiting from a combination of strong data and reopening optimism. Just yesterday the UK eased lockdown restrictions further thanks to the rapid rollout of the covid vaccine.
The Indian covid variant remains a risk to the next steps of re-opening. However, early evidence suggests that the vaccine is effective against the new strain.
Watch for the FOMC minutes
The US Dollar trades sharply lower across the board after plenty of dovish Fed speak and weaker than forecast housing data. Keep in mind that tomorrow also sees the release of the minutes from the latest Fed meeting. These will be scrutinized for any clues on the Fed’s thoughts on inflation.
Where next for GBP/USD?
GBP/USD trades around 1.42 with its sights set on a three year high and there appears to be little to stop it.
GBP/USD trades above its 50 & 100 sma on the daily chart. The RSI is supportive of further upside whilst it remains out of overbought territory.
Immediate resistance sits at 1.4215 the daily high and upper band of the ascending channel. Beyond here the yearly peak of 1.4240 comes into play. A break above this level could see GBP/USD target 1.4374, the 2018 high targeted.
On the downside, support can be seen at 1.4170, May’s previous high. Below here 1.4100 round number and 1.4075 the midpoint of the ascending channel could offer support..