The British pound significantly lost its value on Friday, by 0.65 percent to end at $1.33827, almost erasing the gain a day before. The pair GBP/USD had a weekly decline since the day when the U.S. President Donald Trump almost achieved his goal in passing the tax bill, which has spurred the U.S. dollar for a week. The decrease in pound can be mainly contributed by rising USD.
The U.S. Labor Department said on Friday that employers added 228,000 jobs in November, and the nation’s unemployment rate stayed the same at 4.1 percent. Meanwhile, there is a 2.5 percent rise in average hourly pay for workers from a year earlier, to $26.55 from $25.91.
If we look at the labor market this year, however, wage growth in the U.S. has failed to pick up despite the robust economic performance which reduces the unemployment rate to a lower level. The sluggishness has been relatively broad-based across the labor market, including among low-skilled workers, who might seem to be the most likely candidates for bigger pay increases as labor becomes scarcer.
The bottom 20 percent of workers by average industry pay received a 3.9 percent rise in hourly earnings in October from a year earlier, accelerating from a 3.4 percent advance in the year through October 2016.
Failure wage growth this year shows the U.S. job market is not looking very tight, what should be an essential driver to spur the inflation rate, which is not high enough now.
Let’s turn our focus on UK. After securing an initial agreement on Friday to move Brexit talks to a second phase, Prime Minister Theresa May is keen to start discussing future ties with the EU, and especially the type of trading agreement to try to offer greater certainty for businesses.
“If the British people dislike the arrangement that we have negotiated with the EU, the agreement will allow a future government to diverge,” Gove wrote in a column in the Daily Telegraph. Hence, the process of Brexit still poses a threat to the future economic prospect in UK.
Technically as depicted in the daily chart below, the broader outlook for GBP/USD remains constructive as it preserves the upward trend channel from earlier this year.
For the short-term outlook, GBP/USD declined to approach the 20-day moving average, which may be a support where investors should take a close eye. In the event that the pair fails to find a support, further drop may occur in the near future.
Chart 1: GBPUSD Daily
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