British pound loses ground after mixed jobs report

• UK job growth slides, but wages hit record high
• GBP/USD slips below 1.25

The British pound is in negative territory on Tuesday. In the European session, GBP/USD is trading at 1.2470, down 0.31%.

UK jobs fall but wages rise

Will the real UK labour market please stand up? The UK labour market is showing signs of weakening, while at the same time wage growth grew at a record pace, according to today’s employment release. The economy shed 207,000 jobs in the three months to July, compared to a 66,000 fall a month earlier and weaker than the consensus estimate of -185,000. This was the sharpest loss of jobs since September 2020. The unemployment rate ticked up to 4.3% up from 4.2% and matching the consensus.

The data is a clear sign that the labour market is cooling, but wage growth excluding bonuses rose 7.8%, unchanged from a month earlier and the highest on record. Wages are growing faster than consumer inflation, which rose 6.8% in July. The sharp rise in wage growth will provide support for the hawks who favour pushing rates higher in order to curb inflation.

The Bank of England has been non-committal about next week’s meeting, although Governor Bailey said last week that the BoE was “much nearer” to ending the current tightening cycle. That may indeed be the case, but the markets have priced in a rate hike at the September 21st meeting at close to 80%.

Investor focus will now shift to UK GDP which will be released on Wednesday. After a respectable gain in June of 0.5%, the markets are bracing for a decline of -0.2% in July. A contraction in growth could extend the pound’s losses.

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GBP/USD Technical

• GBP/USD is testing resistance at 1.2471. Above, there is resistance at 1.2519
•  There is support at 1.2395 and 1.2322

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