UK employment data hits record high, pound bulls show strong resilience

On Tuesday (October 12), the British pound rose slightly against the U.S. dollar. Before that, it fell to a four-day low. However, under the positive and optimistic atmosphere of the British economic data, the pound bulls still showed resilience.

UK economic data is strong, but the fuel crisis is worrying

Data show that the number of employees in British companies increased by 207,000 from August, a record high. Employers hired employees through recruitment agencies and entered the resurgent accommodation and food companies to create employment opportunities.

Another official data on Tuesday showed that in the three months ending in August, the unemployment rate fell from 4.6% in May to July to 4.5%, in line with expectations.

The Bank of England is preparing to become the first major central bank to raise interest rates since the outbreak of the new crown crisis, and is currently observing how many people will lose their jobs after the end of the wage subsidy program.

Hussain Mehdi, a macro and investment strategist at HSBC Asset Management, said these data allow the Bank of England to raise interest rates before the end of the year.

However, a survey released on Tuesday showed that British consumers’ spending growth in September was the slowest since January due to concerns about fuel shortages.

The British Retail Consortium (BRC) said that last month's retail spending growth momentum has weakened significantly, compared with September 2020, an increase of only 0.6%, and the increase is much lower than the 3.0% increase in August.

Due to the lack of tanker truck drivers, supply disruptions caused panic fuel purchases in most parts of the UK last month. The government blamed this on the problems faced by the global economy in reopening after the blockade, but critics say this also reflects the UK’s stricter immigration regulations after Brexit.

GBP/USD technical analysis

From a technical point of view, the pound against the dollar currently maintains sideways fluctuations. If it breaks below the 1.3585 support level where the 200-hour moving average is located, it will trigger a lot of technical selling and pave the way for further downside.

At the same time, from the daily chart, the exchange rate has always been difficult to break through the 50% retracement level of 1.3663. This pattern seems to be firmly biased towards bearish traders and supports the prospect of eventually falling below 1.3585.

The subsequent fall is likely to drag the pound against the dollar towards the 23.6% retracement level of 1.3531, and then the key 1.3500 psychological barrier. Some subsequent selling may test the September volatility low near 1.3415-10.

On the other hand, the daily high of 1.3637 area now seems to have become an initial resistance level. Then came the resistance near 1.3663 and the 1.3700 mark.

Continued strength will offset any short-term bearish bias, and pushing the pound to further break the 1.3700 mark against the dollar will help the bulls move towards the relevant resistance near the 61.8% retracement level of 1.3722.

(The British pound against the U.S. dollar daily chart)

GMT+8 20:44, the pound was quoted at 1.3602 against the dollar.