The latest employment data shows the UK's stagnating unemployment rate and high wage growth.
The GBP/USD rate holds within a very narrow range around 1.3555 in early European trading today (15/February). The latest employment data showed a stagnant UK unemployment rate and rapid salary growth, thus supporting expectations of a rate hike next month. However, many factors still weigh on Sterling.
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| GBP/USD Daily chart via TradingView |
The UK unemployment rate as of December 2021 held at 4.1 percent, in line with consensus expectations and the previous period's report. Meanwhile, the average income plus bonus index increased by 4.3 percent. That growth was faster than the 4.2 percent pace as of November 2021, and beat consensus estimates of a slowdown to a 3.8 percent rate.
The jobless claims data (Claimant Count Change) for January 2022 completes this series of good news. The number of jobless claims shrank by 31.9k, better than the consensus forecast of a decline of 28.0k.
This acceleration in salary growth coupled with reduced jobless claims is consistent with the notion that the UK labor market is tightening. The data also aligns with expectations of another UK rate hike in March 2022, by at least 25 basis points.
Regardless, a number of analysts continue to maintain the view that market expectations of a UK interest rate hike in 2022 are running too far. Some economists also began to oppose the discourse of the BoE's further rate hikes. The reason is that an increase in interest rates that is too large in the current situation will actually put pressure on people who are facing a spike in energy prices and various other necessities.
"So high inflation will see 2022 expose the biggest pressure on household finances in more than a decade," said Andrew Goodwin, Chief UK Economist at Oxford Economics, "Although the MPC (BoE) looks set to raise interest rates aggressively in the next few months. forward, we think this response is unnecessary."
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