Another Bank of England rate hike becomes more likely

  • A solid February UK jobs report: Mixed news on jobs, but higher than expected wage growth is inflationary
  • GBP jumps: The GBP has rallied on major forex, with the USD underperforming amidst a mild positive risk appetite.
  • Elsewhere, equities are a shade positive: European indices are edging higher with US futures around the flat line.
  • Metals and oil edge higher: In commodities, gold and oil are showing mild gains, with silver flat.

A mixed bag for jobs but wage growth remains strong

The UK labour market remained solid in February, with a mixed bag of data out from the ONS this morning:

  • Unemployment ticked up to 3.8% in Feb (from 3.7%) which was broadly in line with expectations.
  • The 3-month level of employment for the UK improved to 75.8% in February too, with January’s employment change increasing by 169,000.
  • The claimant count also increased by 28,000 which was higher than expected.

A higher participation rate means more people looking for jobs and this would have contributed to a higher level of unemployment.

Wages remain strong in the UK

However, the key takeaway is wage growth.

Average Weekly Earnings remained strong at 5.9% (total, including bonuses) and 6.6% (ex-bonus).

This was no change on January’s reading, but the market had been looking for a strong decline here on both.

Wages remain strong in the UK

This is not great news for the Bank of England.

Average wages have been a tracker of core CPI in the past 18 months and with wages higher than expected, this leaves the Bank of England more likely to need to hike rates again in May.

If this is now followed by a hot UK CPI release tomorrow, we can expect another BoE rate hike of 25 basis points in May.

GBP strengthens

Broader sentiment in major forex pairs has been more positive today, but this is also helping GBP to pick up.

This is leaving the USD under selling pressure once more.

Broader sentiment in major forex pairs has been more positive today, but this is also helping GBP to pick up.

GBP finding buyers again

GBP has been struggling in recent days, but the increased likelihood of a Bank of England rate hike is lending GBP some support once more.

GBP/USD rebounding from support

We talked about Cable yesterday from a USD perspective. A near-term USD rebound has dragged GBP/USD back to important support.

However, with the wage growth data today helping to support GBP there is a rebound that is protecting the key support at 1.2345.

GBP/USD rebounding from support

Technically, this is sustaining the medium-term positive outlook on Cable.

  • Holding support at 1.2345 maintains the run of higher lows.
  • The daily RSI remaining above 50 helps to sustain positive momentum.

However, the near-term outlook remains mixed to slightly corrective with the key resistance at 1.2545 high from the bearish engulfing candle.

Moving back above 1.2445 would improve the outlook but the bulls need a breakout above 1.2545.

GBP/JPY breaking higher

Another pair moving in a GBP-positive direction is GBP/JPY.

This morning’s move higher is adding to the strong bullish outlook.

GBP/JPY breaking higher

  • The pair has been in an uptrend channel throughout 2023 and has recently broken above the resistance at 166.00.
  • The daily RSI has moved into the high 60s and is at a 7-month high.

A close above 166.85 would be bullish and open a test of 169.25.

However, there is also a degree of caution at the top of the uptrend channel.

The near-term importance of support at 165.40 is growing.

Support and resistance levels for Forex, Commodities, and Futures/Indices 

EUR/USD R2 1.1000
R1 1.0984
S1 1.0930
S2 1.0909


R2 1.2491
R1 1.2438
S1 1.2380
S2 1.2353
USD/JPY R2 135.10
R1 134.70
S1 134.21
S2 133.71


R2 2032
R1 2015
S1 1993
S2 1981


R2 25.60
R1 25.46
S1 24.98
S2 24.80
Brent Crude Oil
R2 86.10
R1 85.65
S1 84.45
S2 83.90


S&P 500 futures
R2 4208
R1 4188
S1 4147
S2 4137
DAX Index 
R2 16,088
R1 15,935
S1 15,785
S2 15,702
FTSE 100 Index
R2 7960
R1 7912
S1 7870
S2 7860

Data: MT5/IXOne

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