Trading News Events: U.K. Jobless Claims Change and Unemployment Rate
Another 25.0K contraction in U.K. Jobless Claims may encourage an
improved outlook for the real economy, but the lack of stronger wage
growth may generate a limited market reaction in GBP/USD as the Bank of
England (BoE) remains in no rush to normalize monetary policy.
What’s Expected:
Why Is This Event Important:
As a result, the BoE may retain a wait-and-see approach throughout the
first-half of 2015, and we may continue to see a unanimous vote to
preserve the current policy until there’s a sharp rise in household
earnings.
However, waning business outputs along with the slowdown in building
activity may drag on hiring, and a dismal employment report may trigger a
near-term pullback in the British Pound as it raises the BoE’s scope to
retain the highly accommodative policy stance for an extended period of
time.
How To Trade This Event Risk
Bullish GBP Trade: Claims Decline 25.0K or Greater Accompanied by Stronger Wages
- Need green, five-minute candle following the print to consider a long GBP/USD trade
- If market reaction favors buying sterling, long GBP/USD with two separate position
- Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward
- Move stop to entry on remaining position once initial target is hit, set reasonable limit
- Need red, five-minute candle to favor a short GBP/USD trade
- Implement same setup as the bullish British Pound trade, just in opposite direction
GBP/USD Daily Chart
- GBP/USD looks poised for a larger recover as it breaks out of the bearish trend/momentum carried over from back in July.
- Interim Resistance: 1.5500 pivot to 1.5520 (38.2% expansion)
- Interim Support: 1.5250 (100% expansion) to 1.5270 (38.2% retracement)
| Period | Data Released | Estimate | Actual | Pips Change (1 Hour post event ) | Pips Change (End of Day post event) |
|---|---|---|---|---|---|
| DEC 2014 |
01/21/2014 9:30 GMT | -25.0K | -29.7K | -136 |
U.K. Jobless Claims fell more-than-expected as the figure shrank another 29.7K in December, while the ILO Unemployment Rate declined to a 6-year low of 5.8% during the three-months through November. Wage growth outpaced the headline reading for inflation, with Average Weekly Earnings expanding an annualized 1.7% during the same period. Despite the ongoing improvement in the labor market, it seems as though the Bank of England (BoE) will preserve its neutral stance as the central bank curbs its near-term outlook for inflation. Nevertheless, the better-than-expected print failed to spur a meaningful reaction in GBP/USD, with the pair largely advancing during the North American trade to end the day at 1.6480.
