Sterling came under pressure this morning following a disappointing UK labour market report. The Unemployment Rate came in above expectations to hit 4.7%, its highest level in two-and-a-half years. The weak data comes on top of last week’s poor GDP number.
Add in yesterday’s high inflation data and it poses a fresh dilemma for the Bank of England. Governor Andrew Bailey appears fairly desperate to loosen monetary policy, and who can blame him given the UK’s poor economic growth and rising unemployment.
But with inflation almost double the Bank’s 2% target, and rising, a hike at next month’s meeting could prove disastrous and yet another misstep for the perennially hapless institution.
Despite the ravages of yet another economically illiterate government, sterling has had a very good run for most of this year, at least against the US dollar. But it has taken a turn lower so far this month.
Source: TN Trader
Of course, it is the dollar which is key here, rather than the British pound. The US dollar found further support this morning, in a move which saw the Dollar Index extend its rally off the multi-year low hit at the beginning of this month.
The Dollar Index continued to hold comfortably above 98.00 following this week’s benign US inflation prints – in contrast to the UK ones.
Yesterday the dollar plunged following the report that President Trump told a group of US policymakers that he was preparing to fire Fed Chair Jerome Powell. But it soon made back its losses after Mr Trump backed away from the story, to some extent.
Meanwhile, market chatter around Fed rate cuts continues. This week’s inflation data has firmed up expectations that any easing may be delayed, certainly beyond this month’s meeting, helping the greenback maintain its edge across major pairs.
