Sterling came under heavy selling pressure after UK data showed a sharper-than-expected deterioration across the labour market. The British pound fell to 1.3550 against the US dollar following the release. But by mid-morning in Europe, it had recovered a touch and was trading around 1.3600.
Source: TN Trader
This still represented a decline of around 2% from the highs hit at the end of last month. The Unemployment Rate rose to 5.2% from 5.1% to register its highest level in nearly five years, while wage growth slowed materially. This should encourage the Bank of England (BoE) to ease monetary policy further, particularly given last week’s weak GDP data.
Markets are now fully pricing in a 25-basis point rate cut from the BoE next month, with expectations for a total of two cuts this year. The softer UK outlook has also pushed EUR/GBP higher, with the pair trading above 0.8700.
The Japanese yen was stronger across the board, making back most of yesterday’s losses, which followed a poor GDP update. Otherwise, the US dollar was little changed, with the Dollar Index still hovering around 96.00.
