GBPUSD buyers profited from a weak US employment number on Friday. New jobs created for the month of March were expected to come in at 188,000 but instead came in at a paltry 103,000.
The US dollar immediately fell and buyers who were ready to pounce, took advantage by buying the GBPUSD which moved over 100 pips in the space of an hour. The gains were capped here as the price hit a major resistance level (red line at top) 1.40.
Wage increases for the month of March came in at a respectable 0.3% (as expected) but the dollar was hurt further by a revision of the employment numbers from the previous two month which were down 50,000.
In addition to this we had a slight increase in the unemployment rate from 4.00% to 4.1% and a slight fall in the labour participation rate (the percentage of the working population that is in the labour force).
The FED is more interested in the wage growth than the headline employment number (which came in as expected) so unless something else changes in the near future the two more interest rate hikes are still on the cards in the USA this year.
The Fed see wage growth indicating higher inflation and higher inflation in their view justifies higher interest rates to contain a potentially overheating economy.
Whether they are right about any of this is highly questionable considering the fact that many respected commentators see debt as the ultimate driver of inflation as opposed to wages.
With personal debt now standing at over $5 trillion in the USA and many struggling with re-payments when the debt house of cards falls we could see the dream of 2% inflation turn to the nightmare of deflation.
Join us this tomorrow evening for an insightful live webinar on what it takes to make money in the financial markets.
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