Sterling Dips on Slower UK Labour Market; Unemployment Rate Tops Forecasts
UK Labour Market Data and Sterling Performance
Market Reaction to Labour Data
LONDON, Aug 18 (Reuters) - The pound fell slightly on Tuesday after data pointed to a slowing labour market as Britain's unemployment rate came in above expectations in June while vacancies fell in July.
Sterling was last 0.1% lower against the dollar at $1.352, after rising to its highest level since May on Monday as traders reduced their bets on rate hikes from the U.S. Federal Reserve.
Impact of Global Events on Currency Markets
Oil prices nudged higher as the Iran war showed no sign of ending, with both Washington and Tehran threatening more military action, boosting the safe-haven U.S. dollar.
Key UK Employment Figures
Figures released on Tuesday showed Britain's unemployment rate held at 4.9% in June, against expectations in a Reuters poll of economists for a drop to 4.8%.
The Office for National Statistics also said the number of open job vacancies fell to 707,000 in the three months to July, the lowest since 2021 and down from 711,000 in the three months to June.
Private sector regular earnings rose by 2.8% year-on-year during the three months to June, marking the weakest growth since the three months to October 2020.
Sterling and Euro Performance
The pound fell very slightly against the euro, with the euro zone's currency up 0.05% at 85.54 pence.
Expert Commentary
"The basic story here is that the jobs market is cool," said James Smith, developed markets economist at ING.
"Barring a severe and persistent spike in energy prices, we think the Bank (of England) will keep rates on hold until next spring, before cutting rates at least twice in 2027."
Monetary Policy and Market Expectations
Traders in money markets are currently wagering on an interest rate hike by the BoE by the end of the year, with 30 basis points of monetary tightening priced in.
Factors Influencing the Pound
Although it slipped on Tuesday, the pound has recently benefited - along with other global currencies - from a range of factors pushing down the U.S. dollar.
Those include joint U.S. and Japanese intervention to strengthen the yen in late July, which weighed on the dollar more broadly; falling bets on Fed rate hikes in recent days; and oil prices remaining relatively subdued despite the U.S.-Iran conflict continuing.
The pound has risen almost 2% over the last two months, putting it slightly higher for the year.
(Reporting by Harry Robertson; Editing by Alex Richardson and Andrew Heavens)
