The latest data out from the UK continues to display the strength of the UK labor market as the number of people working in the UK grew by 65k (3-month period to end of Jan 23) well above the forecast figure of 52k. The increase was largely driven by part-time employees and self-employed workers.
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The unemployment rate held relatively steady on the quarter at 3.7% while the number of people unemployed for over 12 months increased slightly in the latest three-month period.
Average Earnings Excl. Bonus in the UK decreased to 6.50 percent in January from 6.70 percent in December of 2022 while the average earnings incl. bonus eased to 5.7 percent year-on-year in the three months to January 2023. In real terms (adjusted for inflation), growth in total and regular pay fell on the year in November 2022 to January 2023, by 3.2% for total pay (largest decline since the February to April 2009 period) and by 2.4% for regular pay.
Source: Office for National Statistics
UK BUDGET (SPRING STATEMENT) OUTLOOK
Looking ahead to tomorrow we have the UK Budget (Spring Statement) to be delivered by Chancellor Jeremy Hunt. The recent spate of data out of the UK has shown resilience which has been echoed by both the Prime Minister and Chancellor in recent weeks, however both were keen to stress that work still needs to be done.
Lower gas prices are a huge plus for the Chancellor with some reports estimating the cost of the energy price guarantee for the 2023 financial year to have fallen from an estimated GBP13 billion (Autumn Statement) to around the GBP2billion mark ahead of tomorrow’s budget announcement. This decline should allow the Chancellor the opportunity to scrap the proposed increase in gas and electricity prices in April. Fears over any contagion from the SVB bank debacle have taken a backseat following the announcement by HSBC UK that it had acquired the SVB UK unit in what it termed a “Strategic acquisition to strengthen HSBC’s banking franchise in UK”. The move should allow the Chancellor to focus on more pressing domestic matters as summer approaches.
The medium- and longer-term outlook for the UK remains more challenging, particularly from a government debt perspective. There have been positives here as well however, with borrowing so far coming in lower than expected for the current fiscal year. Inflation remains uncomfortably high however and with lower growth expected for the rest of 2023 the Chancellor is expected to maintain many of his policies from the Autumn statement in an effort to bring down Government debt and keep a tight lid on spending.
The initial market reaction following the news has seen GBPUSD decline around 15 pips, which is surprising given the resilience displayed by the jobs data. However, GBPUSD did enjoy a significant rally during the US session yesterday as the dollar struggled with the SVB uncertainty weighing on the greenback.
Yesterday’s bullish move has seen the pair break above the 50-day MA which had served as a key dynamic resistance for GBPUSD since February 3. Resistance to the upside rests at the 1.2270 handle and above that the YTD high at around the 1.2445 mark.
GBPUSD Daily Chart, March 14, 2023