Pound Sterling gains were widespread following the release of the UK’s employment data with the GBP/EUR and GBP/USD pairings rallying.
The British currency had fallen on Tuesday after the pace of domestic inflation was shown to have slowed to a five-year low, undermining Bank of England (BoE) rate hike bets and lessening demand for the Pound.
Although analysts had forecast that it would take a notable increase in UK average weekly wage growth to give Sterling a boost, the news that the nation’s unemployment rate fell to 6% was enough to prompt a rally in the currency.
The UK was shown to have added 46,000 positions in the three months to August, considerably more than the estimate of 30,000.
Applications for jobless benefits fell by less-than-forecast (dropping 18,600 rather than the 35,000 projected) but the unemployment rate eased from 6.2% to 6.0%. This marks the lowest level of unemployment since before the onset of the financial crisis in 2008.
A jobless rate of 6.1% had been expected.
As the Bank of England has frequently hinted that wage growth will have to move more in line with inflation before interest rates increase, the UK’s Average Weekly Earnings figure was of particular note.
Average wages were shown to have increased by 0.7% in the three months to August, up from 0.6% the previous month.
Average earnings excluding bonuses were up 0.9%, bettering the forecast of 0.8%.
In the opinion of Employment Minister Esther McVey; ‘Today’s record figures show that the government’s long-term economic plan to help businesses create jobs and get people working again is proving successful.’
The Pound to Euro (GBP/EUR) exchange rate hit a high of 1.2592.
The Pound to US Dollar (GBP/USD) exchange rate hit a high of 1.5936.
However, economist Charles Levy was less glowing with his remarks; ‘Employment increased by only 46,000, far below the rate we have seen in the past year. That coupled with sluggish wage growth which remained at half the rate of inflation in August should start alarm bells ringing and be the focus of the Chancellor’s Autumn Statement.’
However, while the data was mixed, the Pound still advanced by over 0.2% against the US Dollar, Euro and Australian Dollar.
The GBP/EUR pairing continues to trend below 1.26 and the GBP/USD exchange rate remains below 1.60.
Pound Sterling (GBP) Exchange Rate Forecast
Later today Bank of England policymaker Martin Weale will be speaking about the Benchmark rate.
Weale is one of the two hawkish members of the Monetary Policy Committee who voted in favour of an immediate interest rate increase at two consecutive meetings.
As the minutes from the most recent gathering have yet to be released it will be interesting to see what tone Weale adopts. If he appears more cautious it may indicate that he retracted his yes vote at the last meeting and the Pound could come under pressure.
Tomorrow more Sterling movement could occur after the BoE’s Jon Cunliffe speaks at the annual BBA Conference.
UPDATE
The Pound Sterling to Euro exchange rate is currently trending in the region of 1.2496.
The Pound Sterling to US Dollar exchange rate is currently trending in the region of 1.5969.
On Thursday the Pound has rallied against the single currency and holding relatively statically against the US Dollar. This can be attributed to a hawkish speech given by Bank of England policymaker Martin Weale. Weale argued that the improvement in unemployment should be met with a bank rate rise in anticipation of a build-up of inflationary pressures.
The single currency has softened on Thursday as a result of continued cautious trading amid geopolitical concerns.
In the aftermath of the publication of the US Beige Book, the US Dollar has firmed up against the majority of its most traded currency competitors. The book suggested that most districts reported modest to moderate growth.
Pound (GBP) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,US Dollar,1.5916,
Pound Sterling,,Euro,1.2586,
Pound Sterling,,Australian Dollar,1.8242,
Pound Sterling,,New Zealand Dollar,2.0299,
US Dollar,,Pound Sterling,0.6282,
Euro,,Pound Sterling,0.7942,
Australian Dollar,,Pound Sterling,0.5481,
New Zealand Dollar,,Pound Sterling,0.4925,
[/table]
