Mixed Labor Market Data Leaves Sterling Mostly Unchanged

On Tuesday, the British Pound remained mostly unchanged, after it had briefly declined to its lowest value in about a week.

However, Sterling did not generate much of a reaction, even after the labor market data turned out to be mixed, showing a job market that remains hot for now, but there may be early indicators of a cool down.

UK data

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The unemployment rate in Britain was fairly close to the lowest value seen in almost half a century. However, there was a less than expected rise in the number of people employed.

Moreover, the Office for National Statistics (ONS) also disclosed that there was also a decline in the number of job vacancies for the first time since the middle of 2020.

There was a 4.7% rise in wages, which did not include bonuses, and this was higher than the expected growth of 4.5%.

However, the real value of wages, not including bonuses, saw a faster-than-expected drop. According to the ONS, this drop was faster than ever seen since they had begun keeping records in 2001.

This was all because of the surge in inflation seen in the UK and the rest of the world as well.

Pound movements

The British pound was trading flat by 0804 GMT at $1.2051, after it had dropped earlier to its lowest level of $1.2008, which had last been seen on August 5th.

The currency also remained little changed against the euro, as it was trading at 84.275 pence. The common currency had declined earlier because of disappointing German data.

The labor market data is being closely watched by the Bank of England (BoE), as it is looking for indicators that inflation may finally be cooling.

However, analysts stated that the mixed labor market data was unlikely to move the needle by much in terms of the policy decision of the Bank of England in the next month.

Bank of England

Market analysts said that the data from the labor market was kind of a mixed bag. They said that it was not likely to impact the thinking of the Bank of England (BoE) when it comes to interest rates.

There is the expectation of an interest rate hike of yet another 50 basis points in September. Currently, money markets have priced in an 83% possibility of a 50 basis points increase next month.

This was similar to what had been before the data. After this data, the investors’ focus is expected to shift towards the inflation figures that are due on Wednesday for the month of July.

They are also going to have an impact on the move of the Bank of England in the coming month. Forecasts indicate that the headline consumer price index (CPI) would have climbed to 9.8% in July.

However, the Bank of England (BoE) expects inflation to peak later in the year in October, after climbing a whopping 13%, primarily because of the rising energy prices.

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