GBP/USD drops below 1.280 as UK unemployment surpasses expectations at 4.3%
Pound remains under pressure
On November 12, the British pound continued its decline, falling below 1.280 against the US dollar after mixed employment data and a statement from Bank of England (BoE) Chief Economist Huw Pill.
At the time of writing, the pound was trading at 1.278 against the dollar, although most analysts had anticipated that GBP would hold above the 1.280 support level.
The UK's unemployment rate came in higher than expected. According to the Office for National Statistics (ONS), the unemployment rate for Q3 rose to 4.3%, compared to the expected 4.1%. Additionally, the number of people claiming unemployment benefits increased by 26,700 in October, following a revised rise of 10,100 in September, though still below the forecasted 30,500.
Employment changes also showed a decrease, with September employment gains at 219,000, down from 373,000 in August. Meanwhile, average earnings excluding bonuses rose by 4.8% year-over-year in September, compared to 4.9% in August, surpassing the market forecast of 4.7%. Another wage inflation indicator, average earnings including bonuses, grew by 4.8% in September, above the anticipated 3.9%.
Gradual Rate Cuts Expected
Commenting on the employment report, Work and Pensions Minister Liz Kendall stated: "2.8 million people — almost a record number — are out of work due to poor health. This is bad for individuals, bad for businesses, and it holds our economy back." According to Kendall, the Get Britain Working plan will lead to the largest employment support reforms in a generation, backed by additional investments of £240 million. Under this plan, more than 3 million of the lowest-paid full-time employees will receive a salary increase of £1,400 per year starting from April next year.
A statement from BoE Chief Economist Huw Pill generated even more reaction, suggesting that the UK may be satisfied with the current pace of economic growth. He noted that further rate cuts “will likely be a gradual process” and warned that "global economic shocks could divert the UK from its path to lower inflation."
Despite Pill’s reputation as a hawk, the British pound has been weak in the GBP/USD pair amidst a strengthening US dollar, dropping below 1.280. The pound has lost 0.7% on the day and over 2% over the past five days.
A Trump victory and his plans to increase import tariffs could negatively impact the economic growth of the United Kingdom. Economists at the National Institute of Economic and Social Research (NIESR) project that the U.K.'s GDP will grow by 1.2% in 2025 and by 1.1% in 2026. However, if Trump’s tariff plans are implemented, U.K. economic growth could slow to 0.4%.
