GBP/USD Drops As Cracks Start To Show In UK Labour Market

The unemployment rate in Britain remains defiantly at the historic low levels of 3.9%, rather than ticking higher to 4.2% as expected. That’s where the good news ends.


The unemployment rate in Britain remains defiantly at the historic low levels of 3.9%, rather than ticking higher to 4.2% as expected. That’s where the good news ends. Cracks are starting to appear in the UK labour market and they ain’t small. 

The UK claimant count, so the number of people who signed up for unemployment benefits jumped by 94.4k, well ahead of the 10k forecast and after falling 28k in June. Just last month 81,000 jobs were lost in the UK, owing to the coronavirus crisis..

Suddenly we are starting to see some of those who had been in the no man’s land of furlough, start to appear in the statistics. This is a trend which is set to continue over the coming months as the government tapers its support from the job retention scheme.

As the government withdraws its support, these numbers will get worse. The BoE expects unemployment to reach 7.5%. So far this month we have heard big names across principally the hospitality sector and retail sector announce job losses. This will become more common as the 9 million furloughed either find themselves back in their place of work or in the dole queue. 

Importantly consumption showed signs of returning to normality in July. Consumptions needs to pick up as the government withdraws support, in order for spending to be maintained and jobs kept. 

Average earnings were also worse than forecast declining -1.2%, against -1.1% expectations.
Fears are rising that a post lockdown labour market crisis could hamper the so far solid economic recovery.

GDP tomorrow
Attention will now turn to the UK GDP reading due tomorrow. Expectations are for a contraction in the region -20.5% after -2.2% decline in Q1. Investors will be particularly keen to see how quickly the economy is bouncing back. We know that in April GDP contracted -20.4%, in May it rebounded with a 1.8% gain. The reopening of non-essential shops in June spurred consumer spending and factories resumed productions. A strong June GDP reading could help pull the quarterly figures back into the high teens whilst boost optimism surrounding a V shaped recovery.

Chart thoughts
Following the release GBP/USD dropped lower, hit by the disappointment of such an elevated claimant count. From trading above $1.31 prior to the release, GBP/USD has skidded through the 50 sma on the 4 hour chart, although the ascending channel remains intact. Support can be seen at $1.3025, (ascending trendline) a breakthrough here could open the door to $1.2980 and onto $1.29. On the flip side, should GBP/USD push back above 50 sma at $1.3085, the pair could advance to $1.3115.


More from GBP


This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.