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UK Labor Markets Resilient

Boris Schlossberg, Director of Currency Research, GFT

UK unemployment surprised to the upside with claimant count dropping by -13,700  versus forecasts of 4,900 gain. The unemployment rate dropped to 8.2% from 8.3% the month prior. This was the fastest pace of job growth in nine months indicating that UK labor markets remain relatively buoyant despite broader economic slowdown in UK.

This was the first back-to-back fall on the month in the claimant count since September and October 2010 and the largest monthly decline since July 2011. There was some speculation that the upcoming Olympics may have created a temporary uptick in labor demand, but there was no no anecdotal evidence to that effect. London did show the largest decline in the claimant count of all the regions,  but it was consistent with having the the largest population.

However average earnings rose only 0.6% versus 1.1% eyed indicating that UK consumers are likely to to remain under pressure as income growth lags far behind the CPI which continues to hover above 3%.

Cable spike to 1.5970 in the aftermath of the news but retreated back to 1.5950. The pair is now grossly oversold and may stabilize at these levels making another run to recapture the 1.6000 level if risk appetite returns later in the day.