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Cable Advances in a Limited Fashion as Earnings Overshadow Strong Jobs Report

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Cable Advances in a Limited Fashion as Earnings Overshadow Strong Jobs Report

The British pound snapped a two-day losing streak against its US counterpart Wednesday, but its gains were firmly capped after weak earnings growth overshadowed further improvements in the labour market.

The GBPUSD stopped short of the 1.68 handle, advancing to an intraday high of 1.6798. The pair consolidated at 1.6784, advancing 0.18 percent. The pair faces initial resistance at 1.6802. On the downside, support is likely offered at 1.6727.

In economic news, UK employment continued to rise at a record pace in the three months through April, as the unemployment rate fell from 6.8 percent to 6.6 percent. Economists forecast unemployment to drop to 6.7 percent.

The number of people with a job surged 345,000 to 30.54 million, the largest increase since records began in 1971, the Office for National Statistics reported today. Unemployment declined 161,000 to 2.16 million between February and April, official data showed.

Jobless claims, a narrower gauge of unemployment, declined 27,400 in May, following a drop of 25,000 the prior month. May marked the nineteenth consecutive month jobless claims declined.

Strong jobs data were overshadowed by weak earnings growth. Average earnings including bonuses advanced 0.7 percent between February and April, compared to 1.9 percent in the three months through March. Excluding bonuses, average earnings increased 0.9 percent, compared to 1.3 percent in the three months through March.

Weak earnings growth has been a major catalyst for the Bank of England’s current policy measures. The latest figures suggest the BOE could be compelled to keep interest rates at all-time lows for a prolonged period.

The BOE agreed last week to keep the Bank rate unchanged at 0.5 percent.

In US data, mortgage applications advanced 10.3 percent in the first week of June, the Mortgage Bankers’ Association reported today.

The Financial Management Services will release the monthly budget statement later on in the day.

Price action for US dollar pairs will pick up Thursday when the Commerce Department reports on April business inventories and May retail sales.

The GBPUSD came off its intraday high shortly after the markets absorbed the latest employment figures. The pair is currently trading above the 50-day moving average of 1.6759, where the bias is neutral. The bias shifts to the buy-side at the 100-day average (1.6690) and 200-day average (1.6433).

The pound strengthened against the euro amid a dearth of Eurozone data. The EURGBP declined 0.23 percent to 0.8064. The pair is testing the initial support of 0.8066. Initial resistance is likely found at 0.8101.

The European Commission will release its monthly report Thursday. The Commission’s statistics branch will release data on industrial production on the same day. Eurozone industrial production is forecast to rise 0.9 percent annually in April.

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