Britain’s currency, the British Pound (GBP) is taking it on the chin in the foreign exchange market. This pressure is most clearly a result of continued concern over the fragility of the UK employment situation. Underlying data We’ve noted above that job vacancies are now falling noticeably. A small increase in the unemployment rate may give the Bank of England pause as they consider monetary policy. All eyes are now on September’s employment numbers. Analysts warn that GBP/USD pair volatility is likely to spike, particularly if the data indicates a greater contraction in the UK economy than previously anticipated.
The GBP has held up well against many currencies, most notably coming out as the strongest against the New Zealand Dollar. In real terms, it has appreciated by 0.9%, which could provide the BoE room to lower interest rates. The big picture is still very much up in the air, with economic indicators pointing to a cooling job market.
Current Economic Indicators
The official unemployment rate jumped to 4.7% from April to June. That’s up from 4.6%, the rate we reported in last quarter. So economists and market observers are worried even this tiny uptick. Wage cuts and dismissals should be a concern that a more permanent spike in unemployment would have far-reaching economic consequences. Statistically, the percentage of total job vacancies in the UK decreased by 5.8% over the May to July quarter. This decrease leaves us with 718,000 vacancies, the fewest since April 2021. This telltale sign of job market fragility was recently on display.
“The job market continues to cool, with a marked loss of jobs in retail and hospitality. This is the combined result of a fragile economy, an increase in the minimum wage and higher labour costs.” – Stephen Evans
Second, the GBP exchange rate against other currencies, which has been a mixed picture. It has increased 0.12% against USD and gained 0.16% against Japanese Yen (JPY). This was offset by a very small loss of 0.03% against the Euro (EUR). The currency traded even on the day with no movement compared to the Canadian Dollar (CAD). Otherwise, it enjoyed a daily gain of 0.11% against the Australian Dollar (AUD) and 0.29% against the New Zealand Dollar (NZD).
Market Analysis and Trends
Traders are still digesting what these recent moves mean. For example, this week, they saw the GBP/USD race higher after the fundamentalist-friendly breakout above a short-term downward trendline at 1.3525. The four-hour MACD and SMA are bearish, with the latter at 1.3490. This indicates strong levels of support that are promising to investors keenly tracking this currency pair.
Market participants remain cautious. The impending employment figures are likely to dictate future currency movements and could lead to increased volatility if they indicate a significant weakening of the British economy.
“The easing of the labour market is taking the form of a hiring freeze rather than a wave of layoffs, which remains bad news for jobseekers.” – Gregory Thwaites
Analysts warn against taking too much stock in short-term labor market dynamics. These three elements will go a long way toward creating worsening economic predictions, driving the Bank of England’s policy-making.
Broader Implications for Young Workers
Beyond immediate economic indicators, there are worries about systemic long-term trends impacting targeted demographics, namely young workers. Increasing rates of long-term unemployment can damage this demographic’s career prospects. More than that, it cuts them out of the rich tapestry of participation in our economy.
“Long-term unemployment among young people is on the rise, and can have a lasting effect on their career prospects.” – Helen Gray
This is an example of the unique hurdles that young job seekers have to overcome. It makes apparent the larger national crisis that lies ahead if we do not start doing more to help them succeed in a competitive and demanding labor market today.