The GBP (Great Britain Pound) is on fire as the last unemployment data shows a staggering 5.7% unemployment rate, down from 5.8%. However, this is not the best news from today’s data. That privilege belongs to the dataset that shows that real wage growth shows clear signs of improvement, marching at a 6 year high.
Coupling the aforementioned data, with the low inflation environment in the UK and you have an economy that should grow solidly in years to come. This makes the UK the place to be and therefore the GBP the place to put your money.
However, when trading, one should keep in mind that we’re trading currency pairs, not a single currency. This means that the other side of the equation should be taken into account: the US dollar.
On the other side of the Atlantic, today’s FOMC minutes should show the Fed members confirming the good shape of the US economy and the fact that they stay behind their decision to hike rates sooner rather than later.
How soon will it be? Any hints on an earlier rate hike in the minutes today should make the US dollar rise across the board, and today’s gains on the GPBUSD due to the UK’s data will vanish in the blink of an eye.
This should not take away the fact that the UK economy, which is faring at a pretty decent pace, and it should be shown in the GDP to come.
The rest of February should prove to be decisive for the GBPUSD: a move above 1.56 should signal a possible bottom at the 1.50 level, while the inability to stay above 1.55 signals more weakness to come. Once again, the ball is in the Fed’s hands.
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Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
