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Pound traders, huddle up! The U.K. is set to print its September jobs report on Wednesday (October 14, 9:30 am GMT), giving forex junkies a nice opportunity to grab quick pips. Here’s my Forex Trading Guide for this event.

What is this report all about?

For the newbie traders just tuning in, lemme tell you that employment reports tend to be a huge deal since these serve as leading indicators for economic growth.

After all, a stable jobs market and rising wages tend to spur financial confidence and stronger consumer spending, encouraging businesses to step up production and hiring.

The jobs report from the U.K.’s Office of National Statistics is composed of two main components:

1. The claimant count change indicates the number of people claiming unemployment-related benefits every month (the lower the number, the better).

2. The unemployment rate measures the number of unemployed workers relative to the working-age population (the lower the rate, the better).

Aside from these, forex traders also pay close attention to the average earnings index, which is the three-month rolling average of salaries paid to workers and is an indicator of wage growth.

How did the previous reports turn out?

For the month of August, the U.K. economy shed 1.2K jobs instead of showing the projected 5.1K drop in claimants yet the unemployment rate still improved from 5.6% to 5.5%.

Wage growth came in better than expected, as the average earnings index climbed from 2.6% to 2.9% in the three-month period ending in July.

Prior to this, the U.K. had been printing mostly weaker than expected employment figures since April, with the claimant count change indicating either feeble hiring gains or job cuts accompanied by negative revisions in previous reports.

However, the U.K. labor market seems to have turned a corner recently, suggesting that employment might be able to resume its impressive streak from earlier this year.

What’s expected for the upcoming release?

For the month of September, the claimant count change is expected to show a 2.3K drop in joblessness, possibly enough to keep the unemployment rate steady at 5.5%.

The average earnings index is projected to rise to 3.1% for the three-month period ending in August, reflecting a strong pickup in wage inflation.

According to a report from the Resolution Foundation think-tank, private sector earnings showed their strongest pace of growth in 15 years, spurred mostly by an increase in higher-paid managerial positions and a decrease in lower-paid customer service jobs.

This might be enough to yield an upside surprise for the broader-based average weekly earnings figure, creating a larger gap between consumer inflation and wage growth, thereby putting upward pressure on spending and growth.

How might the pound react?

Stronger than expected jobs figures tend to give the British pound a strong boost against its forex counterparts while weak readings usually trigger losses.

If you’ve been keeping track of previous U.K. jobs reports, you’d know that GBP/USD typically consolidates in a tight box during the hours leading up to the release, providing a potential straddle opportunity.

GBP/USD 15-min Forex Chart (Sept 16, 2015)
GBP/USD 15-min Forex Chart (Sept 16, 2015)

As you can see from Cable’s reaction to the August jobs report, pound bulls were able to charge even though the headline claimant count change fell short of expectations. Forex traders focused more on the positive revisions to previous data, along with the jump in average earnings.

If you’re planning on trading this release, you can opt to catch the pair’s initial reaction to the report, which usually has enough follow-through of around a hundred pips until the U.S. trading session.

Just keep in mind that pound pairs tend to be volatile and might fake out in one direction or another minute before the actual numbers are printed.