On Tuesday, the British pound remained at a five-month low compared to the dollar following data indicating a higher-than-expected increase in Britain’s unemployment rate.
At $1.24475, the pound remained unchanged against the dollar for the day, after touching its lowest level since November 17 earlier in the session. Similarly, it maintained stability against the euro, trading at 85.36 pence.
The latest figures from the Office for National Statistics revealed that the UK unemployment rate for the three months ending in February rose to 4.2% from 3.9%, surpassing the forecast of 4% in a Reuters poll of economists. However, the Office for National Statistics noted ongoing volatility in the data due to a survey overhaul.
Meanwhile, regular wages, excluding bonuses, saw a 6.0% increase compared to the same period a year ago, marking a slight easing from the 6.1% rise in the November-to-January period.
Kenneth Broux, Head of Corporate Research, FX and Rates at Societe Generale, commented on the cooling labor market, emphasizing that wages are also exhibiting a slowdown, which could influence the Bank of England’s decision-making regarding rate cuts.
Investors are awaiting Wednesday’s inflation data for further insights into the BoE’s rate-cut trajectory. Market expectations suggest August as the probable start date for policy easing, with money markets currently pricing in approximately 46 basis points of interest rate cuts by the BoE this year. The first rate cut is considered more likely to occur in August but is not fully priced in.
Furthermore, recent higher-than-expected U.S. inflation figures have led to a reassessment of expectations for the Federal Reserve’s first rate cut, pushing back the anticipated timing from June to September.
