Gbpusd drops as UK inflation and employment data show cooling economy

GBPUSD Analysis

Performance after Wednesday
Period	Pct	Chg	Momentum
Wednesday	-0.58%	-75.3 Pips
Week to-date	-0.47%	-61.1 Pips
October	-2.9%	-387.6 Pips

Upcoming key events (London Time)

Thu 01:30 PM USD Monthly Retail Trade (1-mth)
Fri 07:00 AM GBP Retail Sales Volumes (1-mth)

What happened lately

The United Kingdom’s economic data for September reveal several shifts in consumer price and labor metrics, as reported by the Office for National Statistics. The Consumer Prices Index remained flat at 0% from the prior month, showing a decrease from August’s 0.3%. Similarly, the 12-month CPI dropped to 1.7% from 2.2%, and the Core CPI Inflation Rate decreased to 3.2% from 3.6%. Producer Price Index data also reflected a decline, with the unadjusted output index falling to -0.7% from 0.2%, and the Core Output remaining steady at 0%. The Retail Price Index also experienced a downturn, moving from 0.6% to -0.3% monthly and from 3.5% to 2.7% annually.

On the employment front, there were mixed results. The Claimant Count Rate stayed constant at 4.7%, while the claimant count increased to 27.9K from 23.7K in August. However, the Employment Change for August showed an improvement, increasing by 373K compared to 265K in July. The ILO Unemployment Rate saw a decrease to 4% from the previous 4.1%. Earnings data indicated a slight decrease, with the average earnings excluding bonuses declining to 4.9% from 5.1% and including bonuses decreasing to 3.8% from 4%.

In contrast, the United States New York Empire State Manufacturing Index for October revealed a significant decrease, dropping to -11.9 points from 11.5 in September, according to the New York Fed. With these complex economic indicators, attention shifts to the upcoming retail trade figures for both territories.

The GBPUSD currency pair dropped by 0.58% to 1.29879. The softening inflation indicators and somewhat struggling employment data in the U.K. paint a picture of a cooling economy, exerting downward pressure on the British pound. The decline in the U.S. Empire State Manufacturing Index also suggests potential weakening in U.S. manufacturing, though the upcoming U.S. retail data could offer new insights. The overall market response to Britain’s inflation and employment shifts can potentially continue to pressure GBPUSD, particularly if forthcoming U.K. retail sales data do not show a robust performance.

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What can we expect from GBPUSD today?

GBPUSD on Wednesday dropped -0.58% to 1.29879. Price is below 9-Day EMA while Stochastic is falling.

Updated daily direction for GBPUSD looks bearish as the pair posted lower in Wednesday trading session.

Looking ahead for the day, immediate support level is at S1 1.29504 with break below could see further selling pressure towards S2 at 1.2913. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 1.30773 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 1.29764 would indicate selling pressure.

For the week to-date, take note that GBPUSD is bearish as the pair posted lower by -0.47%.

Key levels to watch out:

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