Sterling up after June jobless rate defies expectations

The pound sterling rose on Tuesday following the release of unemployment data for June, which showed an unexpected decline. The UK’s jobless rate fell to 4.2 per cent in June from 4.4 per cent in May, surpassing expectations of a slight increase.

Sterling was up 0.22 per cent at $1.2794, up from $1.2779 before the data, reflecting positive investor sentiment about the labour market and its potential implications for Bank of England‘s (BoE) policy.

In contrast, the euro fell 0.33 per cent against the pound to 85.34 pence, a one-week low. Despite the positive unemployment figures, economists expressed caution, noting that recent low survey response rates have made the UK’s labour force data less reliable.

Job vacancies also decreased, and annual growth in average weekly earnings excluding bonuses slowed to 5.4 per cent in the three months to June, down from 5.8 per cent in May, marking the slowest growth since August 2022.

Ruth Gregory, deputy chief UK economist at Capital Economics, suggested that the unemployment figures might not significantly influence Bank of England decisions.

Gregory anticipates that the BoE will pause rate changes in September before implementing two additional 25 basis point cuts in November and December.

The pound has declined approximately 2 per cent since reaching a one-year high in July, partly due to a 25 basis point rate cut by the Bank of England in early August. Upcoming July inflation data, due Wednesday, is expected to show a slight increase to 2.3 per cent from 2 per cent in June.

Attribution: Reuters

Sub-Editing: Y.Yasser