The British pound has significantly recovered. It returned to a weekly high after a report indicated that British workers were returning to the labor market at the fastest rate since the beginning of the coronavirus pandemic, as the cost-of-living crisis compelled even those who were feeling well to seek employment.
Today, the Office of National Statistics released a study indicating that the number of unemployed people was reduced by 144,000 in the second quarter alone. The total employment climbed by 296,000 individuals, greatly exceeding experts' predictions of 170,000.The ONS also stated that the persistent labor shortage might begin to lessen if new employees filled the market's surplus of open positions, which surfaced immediately following the termination of quarantine. This trend's persistence could assuage some of the Bank of England's concerns about labor market tensions driving up inflation. Currently, unemployment is at its lowest level since 1974, and job openings have nearly hit a record high. Let me remind you that a similar situation is emerging in the United States, where a substantial overheating of the labor market continues to drive up inflation rapidly.Special consideration was warranted for wages, which rose, albeit considerably more slowly than inflation. Real wages decreased by 2.8%. Recent strikes in the United Kingdom demonstrate the difficulty of the situation when inflation approaches double digits. Workers are beginning to exert pressure on labor unions so that employers actively increase wages, thereby accelerating inflation further. The Bank of England is concerned about the possibility of a spiral when prices and wages increase successively.The unemployment rate overall was 3.8%. There are around 1,300,000 job openings in the economy, which is greater than the number of persons seeking employment. In June, the private sector added 31,000 jobs, half of what economists had predicted. The number of layoffs is at an all-time low.The market is abuzz with rumors that the Treasury would soon decide to raise pay in the public sector by 5 percent all at once, which is higher than the 3 percent set as a guideline. Over the past three months, private sector wage growth has averaged 7.2%.It is unlikely that these moves will prevent the Bank of England from increasing rates further. Michael Saunders, a departing MP, warned Tuesday that the cost of borrowing would certainly exceed 2 percent next year. In August, the rate is anticipated to be 1.75 percent, and by the end of the year, it will reach 3 percent.
After a minor adjustment, the pound continued to rise against this backdrop. Current market conditions allow for the possibility of a stronger upward correction, but only when the bulls break out over the 1.2030 resistance level. After that, you can anticipate a breakout into 1.2080, which purchasers would find more challenging. In the event of a more significant upward movement of the pound, we can discuss the update of 1.1220 and 1.2160. If the bears' breach is below 1.1940, the path to 1.1900 is direct. Going over this range will further decline to a minimum of 1.1810.
In terms of the euro's technical outlook, a large upward corrective to the region of 1.0200 is gradually coming to an end. When the Federal Reserve meeting is imminent, and it is unknown how the committee members will behave, it will be nearly impossible to discuss establishing a broader global upward trend. A retracement to 1.0200 will aid the bulls in continuing the correction, although it will require considerable work. If consolidation occurs at this level, then there is potential for a recovery to the region between 1.0270 and 1.0340. In the case of a decrease in the euro, buyers must demonstrate activity near 1.0120; otherwise, the pressure on the trading instrument will intensify. Having missed 1.0120, you can abandon hopes for the pair's comeback, which will open the door to 1.0080. A breach of this level of support will almost probably raise the pressure on the trading instrument, creating an opening for a test of 1.0040.
