The British pound is likely to face increased selling pressures over the next 24 hours of trading as economists forecast jobless claims in the U.K. to increase 116.0K in March, and the labor market is likely to weaken further as the National Institute of Economic and Social Research expects the economic downturn to last throughout the third quarter of this year.
Trading the News: U.K. Jobless Claims Change
What’s Expected
Time of release: 04/22/2009 08:30 GMT, 04:30 EST
Primary Pair Impact : GBPUSD
Expected: 116.0K
Previous: 138.4K
Effects the change in Jobless Claims had over GBPUSD for the past 2 months
February 2009 U.K. Jobless Claims Change
| The U.K. labor market lost another 138.4K jobs in February, which is the biggest drop in employment since 1971, and conditions are likely to get worse as the region faces its worst economic downturn in over half a century. As a result, total claims for jobless benefits reached 1.39M during the month, while the claimant count rate rose for the thirteenth month to 4.3% from a revised reading of 3.9% in January, and the outlook for private spending remains bleak as households face a deepening recession. As a result, Prime Minister Gordon Brown pledged GBP 20B in fiscal stimulus, while the Bank of England voted unanimously to purchase GBP 75B in government debt, and the unprecedented steps taken on by policymakers should help to mitigate the downside risks for growth and inflation however, as credit conditions remain far from normal, the economic outlook remains bleak. | |
January 2009 U.K. Jobless Claims Change
| Jobless claims in the U.K. increased 73.8K to 1.23M in January, which is the highest level since July 1999, and conditions are likely to get worse in the months ahead as the International Monetary Fund expect the economy to face its worst economic downturn since 1946. BoE Governor Mervyn King said that he expects the U.K. to face a ‘deep recession’ this year as the MPC forecasts the economy to contract at an annualized pace of 4.0% in the first quarter, and as the outlook for growth and inflation remains bleak, policy makers in the region are likely to adopt unconventional measures to stimulate the ailing economy as the benchmark interest rate holds at its lowest level since the central bank was founded in 1694. As market participants expect the BoE to keep borrowing costs at the record low for some time, deteriorating fundamentals are likely to weigh on the exchange rate. | |
What To Look For Before The Release
Traders with access to market depth information via the FXCM Active Trader Platform may use it to gauge the potency of the economic data release as well as to shed some light on the market’s directional bias. Increasing volume ahead of the announcement will telegraph likely follow-through behind whatever move is to materialize, while an imbalance in available liquidity on the Bid versus the Offer side of the market will tell us the direction major institutions are likely favoring ahead of the announcement:
| Bullish Scenario:
If we see substantially deeper available liquidity on the Bid side of the market, this tells us that major price providers in the market are looking to buy the GBP against the US Dollar. Considering that close to 60% of all FX market volume is cleared through just six top banks, we see it prudent to be on the same side of the trade as major institutions and will favor a bullish bias on GBPUSD ahead of the data release. | Bearish Scenario: |
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