Today’s labour market report for the UK – released by the Office for
National Statistics (ONS) – has the Bank of England (BoE) caught between a rock
and a hard place. Wage pressures remain elevated and job figures appear to be
starting to feel the impact of US President Donald Trump’s
tariff plans, as well as the UK government’s economic policies.
According to the ONS report, the unemployment rate held steady at 4.4% in
the three months to February, in line with market expectations. This is the
fourth consecutive month that the rate has remained at this level, after
recording a rise in October 2024.
Job vacancies in March fell to pre-pandemic levels for the first time in the
last four years. Unemployment figures are closely monitored by the BoE’s
policymakers as they reflect the state of the country’s economy.
Economists noted that UK businesses let go of 78,467 workers in March just
ahead of the government’s latest budget measures taking effect this month. One
of the measures closely associated with the jobs market is the increase of
National Insurance Contributions (NIC) for employers, which is expected to push
businesses’ salary costs higher.
ONS data also revealed average earnings including bonuses increased by 5.6%,
matching January’s revised figure, but was slightly less than the 5.7% expected
by market analysts. Average earnings
growth excluding bonuses landed at 5.9%, 0.1% higher compared to January’s
revised reading, but again below economists’ forecasts (6.0%). It should be
noted that both figures outpaced the UK’s Consumer Price Index (CPI) inflation
rate which stood at 2.8% in February.
Sterling strengthens against US Dollar
The British pound (GBP) strengthened against the US dollar (USD) and the euro (EUR), trading at US$1.31
and €1.16, respectively. Sterling is on track to print a sixth consecutive day
in the green against the US dollar, recording its longest winning streak in the
last nine months.
The GBP/USD is poised for
further outperformance. Up 5.5% this year so far, price
action on the monthly timeframe exhibits space to continue pressing north
until highs of US$1.3434 – located just beneath resistance coming in at
US$1.3483. Additional buying beyond said resistances shines the technical
spotlight on another layer of resistance from US$1.4263. Meanwhile, on the
daily timeframe, a breach of resistance around the US$1.3112 neighbourhood,
serves as another bullish indicator towards at least US$1.3268.
UK March CPI report in focus
Some economists suggest that the BoE’s Monetary Policy Committee (MPC) could
change its interest rate strategy, accelerating the rate cut pace this year to
support the UK’s struggling economy, which may feel the additional pressure
from Trump’s tariffs. Nevertheless, wage pressure and the danger of CPI
inflation rising sharply could make the MPC’s members rethink their next
steps.
Tomorrow, the ONS will publish the CPI inflation for March, with market analysts expecting a slight
drop to 2.7% on a yearly basis, down from 2.8%
