UK Wage Growth at 4.7% as GBP/USD Eyes $1.37: Can Bulls Break Higher?
UK labour market data is mixed. Wages are strong but employment is showing cracks. Average Earnings Index (3m/y)...
Quick overview
- UK labour market data shows strong wage growth at 4.7% in July, but rising jobless claims indicate employment weakness.
- The pound is rallying against the dollar, trading at $1.3627, supported by bullish technical indicators.
- Traders should look for confirmation above $1.3654 for potential gains, with targets set at $1.3697 and $1.3748.
- Profit-taking at the first target is advised, as strong UK wage data and US rate cut bets favor the pound.
UK labour market data is mixed. Wages are strong but employment is showing cracks. Average Earnings Index (3m/y) was 4.7% in July, up from 4.6% previously, as pay pressures persist even as inflation eases.
But employment is showing signs of weakness. Jobless claims rose 17,400 in August, above the 15,300 forecast and reversing July’s 6,200 drop. That divergence is the Bank of England’s problem: inflation is falling but wage growth is sticky and unemployment is rising. They have to balance inflation with growth.
Pound Holds Gains Against Dollar
The pound is ignoring labour market worries and is extending its rally against the dollar. GBP/USD is trading at $1.3627, inside an ascending channel that has been in place since early September. Buyers are defending higher lows and momentum is intact.
Technicals are bullish. The 50-day SMA at $1.3533 is a floor, the 200-day SMA at $1.3458 is the trend line and the RSI at 68.8 is just below overbought. There’s not much room for late buyers.
Candlestick action has been good too, with recent sessions forming a three white soldiers pattern – a continuation signal that suggests buying will continue.
GBP/USD Trade Outlook
For traders it’s like the pound is climbing a staircase. As long as it’s above $1.3590 it’s bullish. A break above $1.3654 could unlock $1.3697 and $1.3748.
If momentum fails to sustain then it could pull back to the $1.3530-$1.3550 zone where the 50-SMA is.
Trade setup:
- Entry: Wait for confirmation above $1.3654
- Stop-loss: Below $1.3590
- Targets: $1.3697 and $1.3748
Risk tip: Consider taking some profit at the first target to lock in gains and leave room for more. As long as US rate cut bets are on the dollar and UK data is strong on wages it’s good for sterling. But central bank chatter will be a test.
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