GBP/JPY hits session lows near 202.30 after weak UK employment data

The Pound has come under pressure on Tuesday, following disappointing UK labour market data. The GBP/JPY extended its reversal from Monday’s highs near 203.20 to session lows right above 202.30, before picking up to the 202.60 area at the time of writing.

The Pound retreated from highs near 203.20 to session lows right above 202.30 on Tuesday.
UK employment data disappoints and paves the path for further BoE monetary easing.
Risk appetite and pressures on the BoJ to keep an easy monetary policy are weighing on the Yen.

Data released by National Statistics earlier on the day showed that the ILO Unemployment Rate rose to a four-year high of 5% in the three months to September, against expectations of a steady 4.9% reading.

The higher jobless rate comes on the back of a 29,000 increase in jobless claimants in October, which surpasses the market consensus of a 20,300 increase following a 400 increase in the previous month. These figures have taken the claimant count rate to 4.4% in October,, up from 4.3% in September.

Beyond that, wage growth has eased to a 4.8% year-on-year pace in the three months ending in September, from 5% in the previous month, disappointing markets, which were expecting a 4.9% reading. These figures, coupled with the steady consumer inflation numbers released in October, pave the path for further BoE monetary easing in December.

From a broader perspective, the pair remains steady near recent highs with Yen weakness keeping the Sterling from falling further. A higher appetite for risk on hopes of a US government reopening and Japanese PM Takaichi’s comments pressuring the Bank of Japan (BOJ) against hiking rates in December, are keeping the JPY on the back foot on Tuesday.

Economic Indicator

ILO Unemployment Rate (3M)

The ILO Unemployment Rate released by the UK Office for National Statistics is the number of unemployed workers divided by the total civilian labor force. It is a leading indicator for the UK Economy. If the rate goes up, it indicates a lack of expansion within the UK labor market. As a result, a rise leads to a weakening of the UK economy. Generally, a decrease of the figure is seen as bullish for the Pound Sterling (GBP), while an increase is seen as bearish.

Why it matters to traders?

The Unemployment Rate is the broadest indicator of Britain’s labor market. The figure is highlighted by the broad media, beyond the financial sector, giving the publication a more significant impact despite its late publication. It is released around six weeks after the month ends. While the Bank of England is tasked with maintaining price stability, there is a substantial inverse correlation between unemployment and inflation. A higher than expected figure tends to be GBP-bearish.

Economic Indicator

Average Earnings Including Bonus (3Mo/Yr)

The Average Earnings Including Bonus, released by the UK Office of National Statistics, is a key short-term indicator of how levels of pay are changing within the UK economy. Generally, an increase in earnings is seen as bullish for the Pound Sterling (GBP), whereas a low reading is seen as bearish.