When is the Jobs report and how could it affect GBP/USD?

UK Jobs Report Overview

The United Kingdom (UK) docket has the labor market report to be released by the Office for National Statistics (ONS) on Thursday, later this session at 07:00 GMT.

UK Claimant Count Change for February is expected to ease to 25.8K, reflecting the number of people claiming jobless benefits. The reading was 28.6K in January. Meanwhile, the Claimant Count Rate was at 4.4% in the previous month.

UK Average Earnings, including bonuses, in the three months to January, are expected to accelerate 3.9%, following 4.2% prior, while ex-bonuses, the wages are expected to rise by 4.0% against the previous 4.2%.

UK ILO Unemployment Rate (3M) may tick up to 5.3% in the three months to January, from 5.2% prior. Employment Change showed an increase of 52K in the previous quarter.

How could the UK Jobs Report affect GBP/USD?

GBP/USD may get limited impact if the UK jobs report meets expectations. Traders will likely await the Bank of England’s (BoE) interest rate decision due later in the day. Rising oil prices amid the ongoing Iran conflict have lifted inflation expectations in the United Kingdom and sharply reduced the likelihood of a March rate cut. Prior to the conflict, markets had priced in an 80% chance of a March cut; the vote split will be closely watched, with a 6–3 outcome signaling a more dovish tilt than the expected 7–2 consensus.

The upside of the GBP/USD pair could be restrained as the US Dollar may regain traction amid a more hawkish shift in the Federal Reserve (Fed) outlook. The Fed left interest rates unchanged at 3.50%–3.75% at its March meeting. Chair Jerome Powell noted that while inflation is expected to ease gradually, the pace of disinflation may be slower than previously anticipated. Powell also highlighted that rising oil prices tied to the Iran conflict are likely to push inflation higher in the near term.

Technically, the GBP/USD pair is trading around 1.3270 at the time of writing. Daily chart technical analysis suggests the 14-day Relative Strength Index (RSI) at 38 (neutral) suggests momentum is weaker. The immediate support lies at the three-month low of 1.3218, which was recorded on March 13. On the upside, the pair may find an initial barrier at the nine-day EMA of 1.3323, followed by the 50-day EMA at 1.3445.

BoE FAQs

What does the Bank of England do and how does it impact the Pound?

The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).

How does the Bank of England’s monetary policy influence Sterling?

When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.

What is Quantitative Easing (QE) and how does it affect the Pound?

In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.

What is Quantitative tightening (QT) and how does it affect the Pound Sterling?

Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.