Investors tried to remain optimistic on Tuesday, pushing the Pound higher against the greenback and helping the GBP/JPY cross advance during the London session.
Earlier today, the Office for National Statistics figures showed that UK unemployment has fallen to pre-pandemic levels. Still, wages are struggling to keep up with soaring inflation (as everywhere in the world).
The headline unemployment rate was 3.9%, 0.2 percentage points lower than the previous three-month period, returning it to pre-pandemic levels. It was also below the forecast of 4.0%.
The employment rate was 75.6%, 0.1% higher than the previous three-month period, but 1.0% lower than the three months to February 2020.
However, growth in regular pay – excluding bonuses – was 3.8% in the three months to January 2022, or 4.8%, including bonuses. Both rates are below inflation, which reached a 30-year high of 5.5% in the 12 months to January. The Bank of England expects inflation to continue rising before peaking at over 7% in the spring.
Once adjusted for inflation, growth in total pay was 0.1%, while regular income – which strips out bonuses – was down 1.0% on the year. “Strong bonus payments over the past six months have kept recent real total pay growth positive,” the ONS noted.
BoE meeting on Thursday
The central bank is widely expected to deliver another rate hike on Thursday, bringing the primary rate to 0.75%. However, several additional rate increases are scheduled throughout the year as inflation is getting out of control, further boosted by the recent developments in commodity prices.
Sterling jumps above 200-day average
Recent buying has brought the GBP/JPY cross back above the 200-day moving average (the green line near 153.25). The short-term outlook seems bullish as long as it trades above that level.
The next target could be in the 155 region, where March highs are seen.
Alternatively, if we see a decline below the 200-day moving average again, the cross could fall to 153, or possibly toward the 152 level, where the solid short-term support is.