Risk event for the week starting 11 September: UK jobs and GDP data

Daily FX analyst Warren Venketas picks up the trading opportunity around this and looks at short GBP/USD ahead of UK GDP and jobs numbers.

(Video Transcript)

The UK jobs and GDP report

Welcome. It's that time of the week when we can take a look ahead to a risk event for the week coming up. We're looking at the week starting Monday, the 11th of September. We're off now to Johannesburg and joining DFX foreign exchange analyst Warren Venketas.

What do you got for us next week, Warren? Hi, Jeremy, and thanks for having me. So the risk events I'll be focused on for next week centers around UK economic data, including the UK jobs and gross domestic product (GDP) report respectively. But just a bit of background leading up to these two releases. Recently, we've had DOE officials allude to the fact that the central bank could be at their peak or nearing the peak of the interest rate hiking cycle. And that brings us to next week's releases. So firstly, we have the UK jobs report, which has been showing signs of weakness or deterioration, particularly around employment change and unemployment levels.

Average earnings

However, the key metric that markets have been focused on is average earnings, which have been tracking higher. And this has obviously contributed to inflationary pressures in the UK. Secondly, we have the UK jobs report, sorry, GDP report, which has been quite resilient. If we look at the prior report, particularly around industrial manufacturing and construction outputs. I do think there's a risk for this to soften heading into next week, but particularly average earnings will be the key focus for next week.

The Bank of England

And that could then continue that recent dovish repricing we've seen by markets around the Bank of England interest rate hiking cycle. Let's move over to some technicals. On screen, I have daily pound dollar chart. We can see pound has been steadily declining against the US dollar, most recently breaking below that medium term head and shoulders neckline that I have in black and looking to invalidate the shorter term falling wedge in light blue.

The UK jobs market

There has been a break below wedge support. However, it is quite tentative at this point. Tables currently trading below the 125 psychological handles. Moving over to next week, if we do see a continued deterioration in the UK jobs market, including a softening of average earnings, as well as a less robust GDP report, I think that could bring into consideration the 200 day moving average in blue, and subsequently that 120 308 handle.

On the flip side, if we do see any resilience in jobs and GDP, that could then confidently bring cable back above 125 and expose subsequent resistance zones. So a lot to move, a lot to look forward to next week from a UK perspective. And that's my risk event for the week. All right, thanks so much indeed. As he said, a risk event for the week starting Monday, September the 11th.