London Landscape. Image source: konstantiin © 123RF.com
Earlier today, the Office for National Statistics published its findings concerning the British unemployment rate in the three months to August 2020.
According to the labour market survey, headline unemployment surged to 4.5 per cent over the same period, which manifests a worse-off deterioration of the labour market conditions compared to the initial forecasts.
UK Unemployment Rate. Image source: TradingEconomics.com
Meanwhile, the number of people claiming unemployment benefits in September was recorded at 28.1 thousand, which is far below the preliminary expectations for 78.8 thousand to have claimed support over the previous month.
The pound momentarily recoiled on these welcoming news; however, the GBPUSD pair eventually sunk as the market started discounting the longer-term implications for the British economy from the greater-than-expected unemployment upsurge.
The worse-off employment numbers over the previous quarter entail more woes for Boris Johnson and his cabinet, who find themselves in a detrimental gridlock with the EU on the issue of the Brexit trade deal talks.
Moreover, the fragile recovery of the British economy is now put at risk from a resurgence of COVID-19 cases, and the threat of renewed restrictions and partial lockdowns. All of this extra pressure is likely to weigh down heavily on the sterling in the near future.
As can be seen on the 1H chart below, the GBPUSD broke down below the psychologically significant support level at 1.30000 and is currently testing the strength of the Ichimoku Cloud.
The underlying bearish pressure seems to be mounting for the pair, as illustrated by the MACD indicator. At present, the prevailing momentum in the market is ostensibly bearish, which means that the price action would attempt to sink further down south before the bulls can regain control.
GBPUSD 1H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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