The number of employed people in the UK in December was 65,000, which was higher than the expected 52,000; the unemployment rate in January was 3.7%, which was lower than the expected 3.8%; the average income (annualized quarterly rate) including bonuses in January was announced At 5.7%, in line with expectations of 5.7%; real wages (inflation-adjusted) fell 3.2%, the largest decline since February-April 2009
The latest UK employment data showed that the UK labor market continued to remain strong, with UK employment rising by 65,000 (in the three months to January 23), well above the forecast of 52,000. This increase came mainly from part-time employees and self-employed persons.
Source: DailyFX Economic Calendar
The UK unemployment rate was relatively stable at 3.7%, while the number of unemployed people in the past 12 months has increased in the past 3 months.
Average earnings excluding bonuses in the UK fell to 6.5% in January from 6.7% in December, while the annual rate of average earnings including bonuses slowed to 5.7% in the past three months to January 2023. Between November 2022 and January 2023, growth in real (inflation-adjusted) and regular income declines by 3.2% and 2.4%, respectively, with the former recording the largest decline since the February-April 2009 period.
Source: Office for National Statistics
Outlook for the UK Spring Budget
Chancellor of the Exchequer Jeremy Hunt will unveil his Spring Budget tomorrow. Recent UK data has shown the resilience of the economy, as noted in speeches by the Prime Minister and Chancellor of the Exchequer. However, they all emphasized that action (boosting the economy) is still needed.
The sharp drop in gas prices is good news for the chancellor, with some reports estimating that the cost of the Energy Price Guarantee scheme for the 2023 financial year will fall from an estimated £13bn in the Autumn Budget in tomorrow’s Spring Budget to £2 billion. This may allow the chancellor to successfully reject a proposal to increase the guarantee for gas and electricity prices in April. Fears that the collapse of Silicon Valley Bank could have a knock-on effect eased after HSBC UK announced it would buy the UK arm of SVB, which HSBC said was a “strategic acquisition to strengthen HSBC’s UK chartered banking business”. HSBC’s move will allow the chancellor to focus the budget on domestic issues that are receiving more attention as summer approaches.
The medium- and long-term outlook for the UK remains challenging, especially with regard to government debt. However, the good news is that government borrowing so far has been lower than previously expected for this fiscal year. Inflation remains uncomfortably high and the chancellor is expected to continue many of the policies in the Autumn Budget to reduce government debt and tighten spending given market expectations of lower economic growth through the rest of 2023.
GBP/USD Trend
GBP/USD reacted relatively flatly after the release of the data, falling 15 points in the short-term. Although the employment data showed initial resilience, it did not promote the rise of the pound. However, GBP/USD rose sharply during the overnight US session as uncertainty over Silicon Valley banks weighed on the greenback.
Yesterday’s gains took the pair above the 50-day moving average, which has been acting as resistance since February 3. After breaking through, the upper resistance is looking at 1.2270, and the upper side can further look at the yearly high of 1.2445 so far.
On the contrary, if the exchange rate falls in the market outlook, the 50-day moving average may become a support. After breaking through, it can further look towards the 100-day moving average and the 1.2000 psychological mark directly below.
GBP/USD Daily Chart – March 14, 2023
Source: TradingView
(Written by Zain Vawda, translated by Leona)
The US dollar bull market is in jeopardy under the Silicon Valley Bank turmoil. Is it ushering in an inflection point?
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