- UK labour market cools
- UK Manufacturing and Service PMIs decline
- GBP/USD is testing support at 1.2216. Below, there is support at 1.2174
- There is resistance at 1.2290 and 1.2332
The British pound is slightly lower on Tuesday, after climbing 0.68% a day earlier. In the European session, GBP/USD is trading at 1.2218, down 0.23%.
UK Job Growth, Unemployment Rises
The UK has released “experimental” employment data on Tuesday, replacing the standard labour market survey due to falling response rates. The new reporting format didn’t change the fact that the UK labour market continues to lose steam. The unemployment rate held steady at 4.2%, unemployment rose by 74,000 and the number of employed people fell by 82,000. Last week’s wage growth report showed that wages including bonuses fell from 8.5% to 8.1% y/y for the three months to August, which is still very high and a significant driver of inflation.
Employment data is a key factor for the Bank of England, which will have to decide whether to raise rates or pause at the meeting on November 2nd. The BoE paused in September for the first time since the tightening cycle began in December 2021. Governor Bailey said at that meeting that positive inflation data had allowed the BoE to hold rates. There are no more tier-1 releases ahead of the November meeting, which means that investors will be listening carefully to any comments from Bailey & Co. ahead of the meeting.
The UK also released PMI reports today, which provided further evidence of a weak economy. The Manufacturing PMI improved slightly to 45.2 in October, up from 44.3 in September and above the market consensus of 44.7. Manufacturing has contracted for eight straight months, the longest downturn in 15 years. Services eased from 49.3 to 49.2 in October, missing the market consensus of 49.3. It marked the lowest level in nine months. The neutral 50 level separates contraction from expansion.