UK wage numbers came out as expected: 2.6% on the headline (down from 2.8%) and 2.9% when excluding bonuses (up from 2.8%). The as-expected figures mean that real wages are finally up after inflation had eroded them for quite some time. However, this was expected.
The bad news comes from the Claimant Count Change, or jobless claims, for the month of April. Here we had a nasty surprise with a leap of no less than 31,200, quadruple the expectations for 7,800. To add insult to injury, the figure for March was revised up from 11,600 to 15,700. These numbers indicate a potential rise in the unemployment rate in April. We will get these numbers in the next labor market report.
The GBP/USD dropped ahead of the publication and reached a trough at 1.3523. Yet as the numbers came out, the pair slightly recovered and topped 1.3550 at one point. Nevertheless, cable remains down on the day.
What’s next? Sterling may slide as traders digest the full extent of the news, yet for GBP/USD, a lot depends on the outcome of US Retail Sales due at 12:30 GMT.
Here is a live coverage of the event, as it happened:
The pound plunged quite a bit following disappointing figures from the UK and the consequent decision by the Bank of England not to raise rates. One of the figures that came short of expectations was the lack of rising in wages but the increase of jobless claims seen in the previous jobs report. This report will shed more light on the situation in the UK economy: was it just a winter blip or a deeper issue?
