The British labour market managed to recuperate marginally for the first time since the coronavirus fallout started weighing down on jobs creation in early-2020. According to the Office for National Statistics, unemployment fell by 0.1 per cent in the three months to January, edging lower to 5.0 per cent.
This performance surpassed the preliminary market forecasts, which were expecting headline unemployment to pick up from the previously recorded 5.1 per cent and to rise to a new peak at 5.2 per cent.
Despite this, however, the number of people claiming benefits surged by 86.6 thousand vs an early estimation of only 9.0 thousand. This marks a sizable rebound from the positive contraction of 20.8 thousand claimants that was recorded over the previous period.
Moreover, the marginal fall in unemployment was not enough to offset the broader trend of tightening labour market conditions, as unemployment remains at its highest in over five years.
These numbers are more or less in line with global trends, as vaccination efforts continue in Britain and elsewhere. The bumpy and uneven recovery in the U.K., which is also present in the labour market, corresponds to what Andrew Bailey, Governor of the Bank of England, had previously projected.
The poor employment numbers from today contributed to the recent selloff of the pound. As can be seen on the 4H chart below, the GBPUSD looks poised to continue depreciating, while the greenback gains positive momentum.
Upon completing a Double Top pattern just below the psychologically significant resistance level at 1.40000, the cable started developing a new downtrend. The underlying price action subsequently broke down below the major support level at 1.38500 and is currently trading below the 300-day MA (in brown).
Given these robust bearish signals, the price action is very likely to continue heading lower in the near term. The first target will likely be the major support level at 1.36500. Check out our latest follow-up analysis of the pair for additional information.