GBP/USD- Trading the U.K. Jobless Claims Report
Trading the News: U.K. Jobless Claims Change
What’s Expected:
Time of release: 06/12/2013 8:30 GMT, 4:30 EDT
Primary Pair Impact: GBPUSD
Expected: -5.0K
Previous: -7.3K
DailyFX Forecast: -10.0K to -5.0K
Why Is This Event Important:
U.K. Jobless Claims are expected to contract another 5.0K in May and the ongoing improvement in the labor market should increase the appeal of the British Pound as the region skirts a triple-dip recession. As the Bank of England (BoE) sees a sustainable recovery in Britain, the Monetary Policy Committee appears to be slowly moving away from its easing cycle, and we may see a growing number of central bank officials adopt a more hawkish tone for monetary policy as the board continues to operate under its inflation-targeting framework.
Recent Economic Developments
The Upside
| Release | Expected | Actual |
| Purchasing Manager Index - Services (MAY) | 53.1 | 54.9 |
| Purchasing Manager Index - Manufacturing (MAY) | 50.3 | 51.3 |
| Gross Domestic Product (QoQ) (1Q P) | 0.3% | 0.3% |
The Downside
| Release | Expected | Actual |
| Mortgage Approvals (APR) | 54.6K | 53.7K |
| Retail Sales ex Auto Fuel (MoM) (APR) | 0.1% | -1.4% |
| Total Business Investments (QoQ) (1Q P) | -- | -0.4% |
The pickup in manufacturing and service-based activity may encourage U.K. firms to expand their labor force, and a positive development should produce a bullish reaction in the sterling as market participants scale back bets for more quantitative easing. However, the slowdown in private sector consumption may prompt businesses to scale back on hiring, and a dismal development may weigh on the exchange rate as it renews speculation for additional monetary support.
Potential Price Targets For The Release
Although the shift in the BOE’s policy outlook favors a bullish outlook for the British Pound, the GBPUSD appears to be capped by the 38.2% Fibonacci retracement from the 2009 low to high around 1.5680, and we may see the pair consolidate further as the relative strength index comes up against overbought territory. Nevertheless, as an upward trending channel appears to be taking shape, we will look to buy pullbacks in the GBPUSD on a longer-term scale, and the sterling may outperform in the second-half of the year as the BOE appears to be slowly moving away from its easing cycle.
Forecasts for another drop in U.K. Jobless Claims instills a bullish outlook for the sterling, and a positive development may pave the way for a long British Pound trade as market participants scale back bets for more quantitative easing. Therefore, if claims contract 5.0K or greater in May, we will need to see a green, five-minute candle following the release to generate a buy entry on two-lots of GBPUSD. Once these conditions are met, we will set the initial stop at the nearby swing low or a reasonable distance from the entry, and this risk will establish our first target. The second objective will be based on discretion, and we will move the stop on the second lot to cost once the first trade hits its mark in an effort to preserve our profits.