The pound rose against the greenback yesterday following the unexpected decline in the Claimant Count change data for May. The pound’s uptrend was also aided by lower-than-anticipated US inflation data, which increased market expectations for a slowdown or temporary halt to the Fed rate hike cycle. Overall, the GBP/USD pair rallied from a low of 1.2507 to a high of 1.2605 in the past 24 hours.
According to the data published by the ONS (Office for National Statistics), the UK’s Claimant Count Change, reflecting the change in the number of people claiming unemployment-related benefits, fell by 13,600 in May following an increase of 23,400 in April. Economists had anticipated an increase in the Claimant Count change by 21,400. The reported figure reflects the first decline since February 2022.
Between February and April 2023, the country’s employment rate was 76%, up 0.20% from 75.80% recorded in the November 2022-January 2023 period. The count of employees on payrolls grew by 23,000 in May to 30 million.
Also, the UK’s economic inactivity rate fell by 0.40% q-o-q to 21% in the February–April 2023 period. Between March and May, the estimated number of vacancies declined by 79,000 to 1.05 million.
The published data also indicated that growth in average total pay (including bonuses) and regular pay (excluding bonuses) was 6.50% and 7.20%, respectively, in the February–April 2023 period.
The ONS also stated that the UK’s unemployment rate was 3.80% in April, down from 3.90% in the previous month and a few notches lower than forecasts of 4%.
According to the US Bureau of Labor Statistics, the country’s consumer price index (CPI) inched up 0.10% m-o-m in May, following a 0.40% increase in the previous month and a notch lower than forecasts of a 0.20% rise.
After being stable for the previous two months, the food index increased by 0.20 percent month-over-month in May. Food consumed at home increased by 0.10% m-o-m, whilst food consumed away from home increased by 0.50%. The energy index, on the other hand, decreased by 3.60% in May.
On a y-o-y basis, the US CPI surged 4% in May 2023. The reading, which missed economists’ estimate of 4.10%, reflects the smallest 12-month rise since March 2021. In April, the CPI grew by 4.90%.
Excluding food and energy, the core CPI rose by 0.40% in May after rising 0.40% in April, in line with economists’ estimates. On a y-o-y basis, the core CPI surged 5.30% in May. While the energy index plunged 11.70% y-o-y in May, the food index jumped 6.70% in the same period.
The unexpected decline in the Claimant Count change and solid signs of easing inflationary pressure, implying a slowdown or even a temporary halt in the Fed rate hike, are expected to keep the GBP/USD pair slightly bullish in the short term.
Technically, the GBP/USD pair is rising after testing support at 1.2390. The next resistance is anticipated only near 1.2830. Additionally, the currency pair is trading above its 50-day moving average while the stochastic indicator is ascending toward the bullish zone. Therefore, we anticipate the GBP/USD pair to remain in an uptrend in the short term.
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.
