TheNews

Trading the News: U.K. Jobless Claims Change

Another 30.0K decline in U.K. Jobless Claims paired with a hawkish Bank of England (BoE) Minutes may spark a near-term rebound in GBP/USD should the fundamental developments boost interest rate expectations.

What’s Expected:



Why Is This Event Important:

At the same time, Average Weekly Earnings are projected to increase an annualized 2.2% after climbing 2.1% in January, and a marked expansion in household earnings may encourage BoE Governor Mark Carney to normalize monetary policy sooner rather than later as the central bank anticipates a more sustainable recovery in the U.K economy.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Markit Purchasing Manager Index (FEB)	53.3	54.1
Producer Price Index- Input n.s.a. (YoY) (JAN)	-11.9%	-14.2%
CBI Business Optimism (JAN)	--	15

Falling input costs paired with the pickup in business confidence may spark a marked expansion in job/wage growth, and a positive development may heighten the appeal of the British Pound as the BoE largely remains on course to normalize monetary policy over the medium-term.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Construction Output s.a. (MoM) (JAN)	1.3%	-2.6%
Manufacturing Production (MoM) (JAN)	0.2%	-0.5%
Mortgage Approvals (JAN)	61.0K	60.8K

However, the slowdown in building activity along with the pullback in business outputs may drag on hiring, and a dismal labor report may push Governor Carney to further delay the normalization cycle in an effort to encourage a stronger recovery.

How To Trade This Event Risk

Bullish GBP Trade: Claims Slip 30.0K or More Accompanied by Stronger Wages

• Need green, five-minute candle following the print to consider a long GBP/USD trade
• If market reaction favors buying sterling, long GBP/USD with two separate position
• Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward
• Move stop to entry on remaining position once initial target is hit, set reasonable limit

Bullish GBP Trade: Labor Report Fails to Meet Market Expectations

• Need red, five-minute candle to favor a short GBP/USD trade
• Implement same setup as the bullish British Pound trade, just in opposite direction

Potential Price Targets For The Release
GBP/USD Daily Chart

• The near-term rebound in the RSI may pave the way for a larger rebound in GBP/USD as the oscillator comes off of oversold territory.
• Interim Resistance: 1.5000 pivot to 1.5020 (50% expansion)
• Interim Support: 1.4700 pivot to 1.4710 (78.6% expansion)

Impact that the U.K. Jobless Claims Change has had on GBP during the last release

Period	Data Released	Estimate	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
JAN 2015	02/18/2015 9:30 GMT	-25.0K	-38.6K	+62	+73

U.K. Jobless Claims decline another 38.6K in January following the revised 35.8K contraction the month prior. The unemployment rate subsequently fell to 5.7% in three-months through November, reaching the lowest level since September 2008. In addition, private wages grew more-than-expected over the last quarter at an annualized rate of 2.1% amid forecasts for a 1.7% print. The ongoing improvement in the U.K. labor market may encourage the Bank of England (BoE) to retain a hawkish tone for monetary policy as the central bank anticipates stronger wage growth in 2015. The sterling gained ground following slew of positive prints, with GBP/USD breaking above the 1.5400 handle to end the day at 1.5444.

--- Written by David Song, Currency Analyst and Shuyang Ren

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