For a second month in a row, British employment figures were superb – Claimant Count Charge showed that 32,900 got back to work, and also last month’s figure was upgraded. While this is normally good news for the currency, the delicate timing could turn it into a burden. Here’s why.
Also yesterday’s inflation figures came out stronger than expected. It seems that inflation is no longer limited to oil prices, but gathering pace elsewhere. This could be problematic for the economy, but Pound-positive. The employment numbers were definitely positive for the economy, but not necessarily for the Pound:
Claimant Count Charge, Britain’s first and foremost employment figure, released a few weeks after the months ends, was quite impressing once again. Similar to last month’s number, 32,900 people got back to work. And last month’s figure was upgraded – 40,100 people got back to work.
This figure, the reflection of the US Non-Farm Payrolls, is very impressive. It’s the biggest decline since 1997. Any country that sees an improvement in the job market sees its currency on the rise. More jobs mean more spending, a higher chance of inflation and a higher chance of a rate hike, making the currency attractive.
Well, the initial response of the Pound was indeed positive – GBP/USD jumped from 1.5380 to 1.5410 and later advanced up to 1.5440, higher than yesterday’s highs. But this didn’t last, and the pair fell back down.
Close elections in Britain
The delicate timing make this release problematic – the general elections are due on May 6th, two weeks time. Every economic indicator is highlighted by the three opposing parties.
The first television debate was won by Nick Clegg – the leader of the small Liberal Democratic party. Following this debate, his party passed Gordon Brown’s ruling Labour Party in the polls. The Conservatives, led by James Cameron kept the lead, far enough for both rivals.
Many months ago, they were projected to replace Labour, but as the elections came close, the situation became more complicated, and fear of a hung parliament began looming on the Pound.
A parliament where no party has an absolute majority means that it’s hard to pass decision and manage the economy with full control. Each time that the parties got close in the polls, the political uncertainty took its toll on the Pound.
Employment figures – back wind for Brown
Labour, the ruling party since 1997 which fell to the third place in polls, can now mark a victory – these excellent employment figures belong to them. Brown will probably highlight these figures towards the elections. The other parties will try to ignore it, but the figures are too good.
Jobs are the most sensitive economic issue and they might erase some of the Tories’ lead, adding to the tension and to the fear of a hung parliament.
So, this is a rare case where excellent figures could hurt the currency.
Want to see what other traders are doing in real accounts? Check out Currensee. It’s free.
