The Bank of England's Dilemma
Of the three central banks that I primarily trade, the Bank of England (BOE) has the biggest puzzle. Today's data was the worst possible for Governor Bailey and his team. Specifically, employment fell by 66,000 and the unemployment rate ticked higher by 0.2% for the second month in a row to 4.2% (the Federal Reserve would be delighted with this turn of events).
On the other hand, wages continue to rise in the UK, with the ONS noting that June recorded the highest annual wage growth rate since comparable records began in 2001. In addition, we are now seeing real wages/earnings move back into positive territory for the first time since the end of 2021.
The nightmare of central bankers is coming true.
What does this mean? It just raises further concerns that the squeeze on the economy is starting to translate to the labor market. And in that lieu, it could lead to a sharper downturn in the quarters to come.
This only validates further concerns that the UK could be facing the risks of stagflation, which is certainly not something that the BOE would like to see. Add in higher financing costs and tighter credit conditions alongside the cost of living crisis, and that's not quite the recipe for the pound to be optimistic in the bigger picture.
The data is one side of the coin, but the other, more important side, is the chart, as everything is drawn on it.
The area described in the previous analysis has so far prevented bears from another charge. The key level for supply is currently 1.2819. It should be maintained if the falls are to pick up pace.
It is also worth paying attention to whether the supply will remain in the downward channel (red lines).
We still have important US data today, namely retail sales, which will tell us how strong the American consumer is - this may have a significant impact on GBP/USD prices.
On the other hand, wages continue to rise in the UK, with the ONS noting that June recorded the highest annual wage growth rate since comparable records began in 2001. In addition, we are now seeing real wages/earnings move back into positive territory for the first time since the end of 2021.
The nightmare of central bankers is coming true.
What does this mean? It just raises further concerns that the squeeze on the economy is starting to translate to the labor market. And in that lieu, it could lead to a sharper downturn in the quarters to come.
This only validates further concerns that the UK could be facing the risks of stagflation, which is certainly not something that the BOE would like to see. Add in higher financing costs and tighter credit conditions alongside the cost of living crisis, and that's not quite the recipe for the pound to be optimistic in the bigger picture.
The data is one side of the coin, but the other, more important side, is the chart, as everything is drawn on it.
The area described in the previous analysis has so far prevented bears from another charge. The key level for supply is currently 1.2819. It should be maintained if the falls are to pick up pace.
It is also worth paying attention to whether the supply will remain in the downward channel (red lines).
We still have important US data today, namely retail sales, which will tell us how strong the American consumer is - this may have a significant impact on GBP/USD prices.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.