GBP/USD Strengthens Modestly Following UK Labor Data Release
The Pound Sterling strengthened against various currencies, but experts caution against placing too much emphasis on today’s UK labor data release.
The Pound Sterling experienced modest gains in this week's trading following a favorable UK labor data release. GBP/USD reached a weekly high around 1.2590, GBP/JPY rose by 0.4% to 196.80, while the EUR/GBP rally remained capped below the 0.8620 threshold.
Last week, the Bank of England (BoE) indicated it would monitor inflation and wage data developments to inform future interest rate decisions. Market data yesterday showed less than a 50% chance of a BoE rate cut in June, prompting the market to focus on today's UK economic data releases for further clues.
The data revealed that the UK labor market remains relatively "hot." Some components weakened as expected, including the unemployment rate, which rose from 4.2% to 4.3%. However, productivity remained high, and wage growth remained stable.
The Average Earnings Index Including Bonus held at 5.7% for March 2024, contrary to the previous consensus which expected a slowdown to 5.3%. The Average Earnings Index Excluding Bonus also remained steady at 6.0%.
The Pound Sterling briefly dipped following the publication of this data but quickly rebounded. Experts caution against placing too much importance on this data release due to various doubts about the accuracy of UK labor statistics. Some also suggest that next week's UK inflation data release may be more critical.
The Pound Sterling experienced modest gains in this week's trading following a favorable UK labor data release. GBP/USD reached a weekly high around 1.2590, GBP/JPY rose by 0.4% to 196.80, while the EUR/GBP rally remained capped below the 0.8620 threshold.
Last week, the Bank of England (BoE) indicated it would monitor inflation and wage data developments to inform future interest rate decisions. Market data yesterday showed less than a 50% chance of a BoE rate cut in June, prompting the market to focus on today's UK economic data releases for further clues.
The data revealed that the UK labor market remains relatively "hot." Some components weakened as expected, including the unemployment rate, which rose from 4.2% to 4.3%. However, productivity remained high, and wage growth remained stable.
The Average Earnings Index Including Bonus held at 5.7% for March 2024, contrary to the previous consensus which expected a slowdown to 5.3%. The Average Earnings Index Excluding Bonus also remained steady at 6.0%.
The Pound Sterling briefly dipped following the publication of this data but quickly rebounded. Experts caution against placing too much importance on this data release due to various doubts about the accuracy of UK labor statistics. Some also suggest that next week's UK inflation data release may be more critical.
"This provides mixed signals for the BoE ahead of its planned rate cut in June – restrictive policies are beginning to impact the labor market even though wage growth, inherently inflationary, remains strong. The focus will be on next week’s inflation data – if inflation drops toward the expected 2%, then these earnings and unemployment figures will carry less weight in their decision-making," said Charles Hepworth, Investment Director at GAM Investments.