- The GBP/JPY loses ground around 195.65 in the early European session on Tuesday.
- The United Kingdom unemployment rate rose to 4.6% in the three months until April; The change in the number of applicants was 33.1k in May.
- The expectations of a hard line box support the Japanese yen and act as wind against for the crossing.
The GBP/JPY crossing weakens about 195.65 during the early European session on Tuesday. The sterling pound (GBP) is still weak in front of the Japanese Yen (JPY) after the United Kingdom employment data. The operators will keep an eye on the monthly data of the Gross Domestic Product (GDP) of the United Kingdom for April, which will be published on Thursday.
The data published by the United Kingdom National Statistics Office on Tuesday showed that the country’s ILO unemployment rate increased to 4.6% in the three months to April compared to the previous 4.5%. This figure was in line with the expectations of 4.6% during the informed period.
Meanwhile, the change in the number of applicants increased by 33.1k in May compared to -21.2K previous (reviewed from 5.2k), below the 9.5K consensus. The GBP attracts some vendors in an immediate reaction to the weakest employment report of the United Kingdom.
Japan’s GDP contracted at an annual 0.2% rate in the first quarter, compared to the initial estimate of a 0.7% drop, the Japan cabinet office showed on Monday. An upward review of the GDP of the first quarter of Japan has reaffirmed the increases in rates of the Bank of Japan (BOJ) and could underpin the JPY.
The governor of the Boj, Kazuo Ueda, said Tuesday that the Central Bank will raise interest rates if it has enough confidence that the underlying inflation is close or moves around 2%. The Japanese Central Bank is ready to hold a two -day policy meeting next week.
FAQS EMPLOYMENT
The conditions of the labor market are a key element to evaluate the health of an economy and, therefore, a key factor for the assessment of currencies. A high level of employment, or a low level of unemployment, has positive implications for consumer spending and, therefore, for economic growth, which drives the value of the local currency. On the other hand, a very adjusted labor market – a situation in which there is a shortage of workers to cover vacancies – can also have implications in inflation levels and, therefore, in monetary policy, since a low labor supply and high demand lead to higher wages.
The rhythm to which salaries grow in an economy is key to political leaders. A high salary growth means that households have more money to spend, which usually translates into increases in consumer goods. Unlike other more volatile inflation sources, such as energy prices, salary growth is considered a key component of the underlying and persistent inflation, since it is unlikely that salary increases will fall apart. Central banks around the world pay close attention to salary growth data when deciding their monetary policy.
The weight that each central bank assigns to the conditions of the labor market depends on its objectives. Some central banks have explicitly related mandates to the labor market beyond controlling inflation levels. The United States Federal Reserve (Fed), for example, has the double mandate to promote maximum employment and stable prices. Meanwhile, the only mandate of the European Central Bank (ECB) is to maintain inflation under control. Even so, and despite the mandates they have, labor market conditions are an important factor for the authorities given its importance as an indicator of the health of the economy and its direct relationship with inflation.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
