This Wednesday morning, nov 17th at 9:30am GMT (4:30am EST) the employment data for the UK was released. There are a few numbers but the main one we watch in the live forex and futures trading room is the UK Claimant Count Change. This is a bit different that other employment figures such as the Non-Farm Payroll out of the USA. On this one a lower number is better because what the number is reporting is the number of unemployed people claiming unemployment benefits, so fewer claimants equals more employed equals better economy and thus strong British Pound. There is also the ILO Unemployment Rate and an Average Weekly Earnings number. Naturally it is helpful if these come out deviating from the expected number in agreement with the deviation of the Claimant Count Change, higher earnings are good as it means more spending by workers, and a lower ILO Unemployment Rate is good as it also signifies more employment.
However today this data came out at the same time as the release of the minutes from the last Bank of England Meeting when they discussed whether or not to change Interest Rates or to add or subtract from the Asset Purchase Facility the APF. For these minutes the main thing to watch for was any change in the vote out of the 9 members of the BOE. Sentance is the hawk of the group and he consistently votes to raise rates, while Posen is the dove and wants to raise 50 Billion to the 200 Billion already allocated to APF. There was some possibility that up to 2 of the other remaining 7 members may have voted to raise the APF like Posen. This would have been bad for the British Pound as more APF basically means printing more money, and more money in circulation means it is less valuable. However there is more to this report than watching the vote count, traders also need to look out for any change in the language of the statement, any change in outlook positive or negative. This can be a subtle change and always can depend on how the market chooses to interpret the statements based on the kinds of things the market is focused on at the time, again subject of a another post. Anyway here is the news:
(UK) OCT JOBLESS CLAIMS CHANGE: -3.7K V +6.0KE (first decline since July); CLAIMANT COUNT RATE: 4.5% V 4.5%E
- Prior Claims Change revised better from 5.3K to 1.3K
(UK) SEPT ILO UNEMPLOYMENT RATE: 7.7% V 7.7%E
- No revisions
(UK) SEPT AVERAGE WEEKLY EARNINGS 3M/Y: 2.0% V 2.0%E; WEEKLY EARNINGS EX-BONUS 3M/Y: 2.2% V 2.3%E
- No revisions
(UK) BOE AGAIN VOTES IN 3-WAY SPLIT ON MPC VIEWS; Sentance again voted for a 25 bps interest rate hike, Posen again voted to increase the ATP by £50B
- MPC Majority: Balance of risks has NOT changed significantly and decided it was right to keep the expansionary policy.
- MPC Majority: Forecasts that CPI to decline towards the 2.0% target in the medium term; Some of the majority did see risk of higher inflationary expectations; Members of majority have differing views in inflation risks
- MPC Majority: Premature to tighten while there is significant spare capacity but also premature to ease without clear signs of slowdown
- Reiterates that most of the members stood ready to adjust policy in either direction
- Member Sentance (hawk) noted that recent news was in favor of a tightening policy sooner rather than later
- Member Posen (Dove) noted that BoE's forecasts underestimated the impact of fiscal tightening on consumption and budget cuts.
So basically all was positive for the Pound on this report. The vote count was as expected and the no other members had joined Posen. Claimant Count Change came out lower, however it just missed the required deviation to trigger an autoclick news spike trade by a few decimal points. Initial Price Action was up but it was very whippy, coming back to the pre-release price and moving back up again all in the first few seconds. Going into this news traders were mindful of the large move down we had the day before, cable basically fell over 200 pips and really broke out a few hours after the US Stock Market opened. This falls was caused by a larger sell-off in stock indices as fears about the situation in Ireland and about the Chinese raising Rates came into focus, however there were some specific events which added fuel to the fire because the market was well aware of these facts before things really dropped off hard, especially for the Pound. Around 3:30pm GMT BOE's King said it is possible that the BOE will conduct additional QE, also about 5:30pm the Fed's Bullard said that it was possible that the Fed will not do the full 600 Billion specified in the last meeting. The Stock Indices did not like this. We see when the Stock Markets & Commodities sell off basically this is risk aversion and this causes a the USD to strengthen.
Despite all this however, in the Profitmonger's Live Trade Room an afterspike trade was given near the 38% retracement of the initial spike after the news release. Just above here was the 38% of the larger move down the day before. Just like during yesterday's CPI when GBPUSD was contained by the 50% retracement of the move down for the whole week - which by the way lead to a gain of over +200 pips!!!! Learning to watch how the news interacts with the larger timeframe trend, sentiment and flows in the market can lead to the some of the most profitable trades, they do take a bit more time however, not the 5-15 minutes that most news trades take. The GBPUSD moved off this key fibonacci level but again bounced off the former spike high and came back up to test this fib level again around 1.5935 forming a slightly lower high....Cable then sold off back below the 1.59 handle so this was a decent +65 pip move.
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