The USD started turning bullish last summer, as CPI (consumer price index) inflation increased above 5%, which forced the FED to turn hawkish and start reducing the QE purchases last November. This should end entirely this month. They are expected to increase interest rates by 25 bps, to 0.50%, tomorrow, although some analysts think that we might see a 50 bps rate hike to 0.75%.

The Bank of England, on the other hand, has increased interest rates twice, from 0.10% to 0.50%, but that hasn’t helped the GBP much – it continues to be bearish, and it has turned bearish against the Euro as well. So, the trend in GBP/USD remains bearish, and now this retrace looks complete on the H1 chart, so we decided to open a sell signal just a while ago.

UK December/January Employment Report

• February jobless claims change -48.1k vs -31.9k prior
• January jobless claims were -31.9k

• January ILO unemployment rate 3.9% vs 4.0% expected
• December unemployment rate was 4.1%
• January employment change -12k vs 23k expected
• December employment change was -38k

• January average weekly earnings +4.8% vs +4.6% 3m/y expected
• December earnings were +4.3%
• Core January average weekly earnings  (excluding bonus) +3.8% vs +3.7% 3m/y expected
• December average weekly earnings were +3.7%

The number of payrolled employees in the UK rose by 0.9% on the month, with early estimates showing a total of 29.7 million persons. That is a rise of 5.5% compared to the same period last year. The jobless rate continues to trend lower, and that hints at further tightening, although total hours worked are still below pre-pandemic levels.

As for wages, base effects are still playing a role in skewing the data upwards, but at least they aren’t as extreme as they were at the start of the pandemic.