UK Claimant Claims Count Soars, Pound Faces Uncertain Future

The UK unemployment claims come in more than 15,000 more than markets were expecting and higher than estimates from earlier in the year. Yesterday, the market analysis evaluated the GBP/USD’s downward trend pattern, gaining momentum after this morning’s employment data. Over the past 90 minutes, the exchange rate declined by 0.45%. 

However, investors should note that the US Dollar is increasing in value against most competitors and not only against the Pound. The Dollar declined during yesterday’s trading session but did not drop to a lower low. Again, the index continues to follow an upward trend pattern. Bullish traders hope the index will maintain momentum above 102.75; otherwise, the currency may show a different pattern. Traders also continue to monitor the negotiations between President Biden and the Speaker of the House, Mr. McCarthy, a Republican. According to the president, the parties have not agreed on all aspects of the debt ceiling, but there is progress. So far, the debt ceiling issue has proven to be favourable for the Dollar, possibly due to the lower investor confidence. 

As the US Dollar has increased in value since May 4th, the price of Gold has come under pressure, forming a descending triangle pattern. The price during this morning’s European session opening gained bearish momentum as the Dollar increased in value. The price of Gold continues to hover around the support level of $2,000. According to the US Commodity Future Trading Commission, the number of speculative positions is increasing weekly. According to the latest report, the number of sell positions outnumber buy positions by 6:1.

GBP/USD - UK Claimant Claims Count Soars

As mentioned above, the exchange rate has come under pressure from the latest UK employment data and the appreciating US Dollar. The exchange rate formed a full price correction during Monday’s trading, while other major currency pairs only formed a retracement. This is due to the Pound’s strengthening across the currency market. The Pound rose against the US Dollar, Euro and Japanese Yen. However, this morning, the Pound is declining against all currencies. Therefore, we are avoiding a “tug of war” scenario. The next support level is 1.24400, which is 0.29% lower than the current price. In addition to this, as the exchange rate has experienced high volatility, investors should be cautious of retracements, even if temporary. 

GBP/USD 15-Minute Chart on May 16th 

This morning, the Pound is being negatively influenced by the UK Claimant Claims Count, which added 46,700 individuals. This is much higher than the 31,000 markets expected and 28,200 from the previous month. The figure is also the highest seen since March 2021, and analysts are unsure if the unemployment rate will remain at 3.8%, as previously estimated. Tomorrow, the Bank of England governor is due to give a speech at 12:50 GMT+3, and markets will closely scrutinize any comments made by the governor on the employment data. The governor has recently advised markets the UK economy will most likely not experience a recession. 

The debt ceiling negotiations will continue influencing the price of the US Dollar and this afternoon’s Retail Sales figures. Investors expect the Retail Sales Figures to read 0.8% and can positively influence the Dollar if the figure comes in at 0.8% and above. Sentiment towards the Dollar is also improving due to various comments from the Open Market Committee members. The Committee advises that interest rates will not decline even if the US sees a slight recession, and for as long as inflation is high and employment is strong, further hikes are possible. 

NASDAQ Continues to Obtain Bullish Indications

The NASDAQ was the only US index to experience reasonable gains during yesterday’s trading. The instrument increased, forming a full price correction, and regained losses from May 12th. The price during this morning’s Asian and European futures markets show mixed price movements. Investors will continue to monitor the price movements as we edge closer to the US Open. When evaluating longer-term technical analysis, the index continues to form a bullish trend and obtain bullish signals from regression channels, crossovers and oscillators.

NASDAQ 1-Hour Chart on May 16th 

The Retail Sales data will also influence the index this afternoon, indicating the current state of consumer demand. The price of Netflix has increased this month as the company has confirmed the company will reduce the expenditure of over $300 million. The capital was planned to tackle the 100 million houses in North America that are currently sharing passwords. Instead, this plan will be postponed. Netflix holds the 17th highest weight within the NASDAQ. 

The most influential stock within the NASDAQ continues to be Microsoft, followed by Apple, Amazon, NVIDIA and Alphabet. NVIDIA is scheduled to release its quarterly earnings report next Wednesday, which will likely create an increased level of volatility for the NASDAQ. 

Summary:

• The UK unemployment claims come in more than 15,000 more than markets were expecting and higher than estimates from earlier in the year. 
• The Pound declines against all currencies after experiencing gains on Monday. Investors turn their attention to tomorrow’s BoE Governor Speech for comments on the employment data. 
• The NASDAQ continues to obtain bullish signals from technical analysis and receives a boost from bullish price movement from Netflix. 
• NVIDIA will release its quarterly earnings report next Wednesday, likely driving the price.