Pound Sterling rises as positive UK job data weighs on the BoE’s sequential interest-rate lowering predictions.
The Pound Sterling (GBP) rises sharply against its key counterparts during Tuesday’s London session.
The UK unemplo’ment rate decreased unexpectedly to 4.2%, but average earnings increased more than predicted.
The British pound strengthened after the United Kingdom’s (UK) Office for National Statistics (ONS) announced positive labor market data for the three months ending in June. Weighing on market expectations of further interest rate reduction by the Bank of England.
The agency said that the International Labour Organization The unemployment rate unexpectedly fell to 4.2%. Economists projected the unemployment rate to rise to 4.5% from the previous estimate of 4.4%.
Aside from boosting the job market, the slower-than-expected decrease in Average Earnings Excluding Bonuses has lowered expectations for further BoE rate reduction. Average Earnings, a wage growth indicator. That drives inflation in the service sector, climbed at a faster-than-expected pace of 5.4% from the predictions of 4.6% but was slower than the earlier reading of 5.7%.
On Monday, Catherine Mann, a member of the BoE’s Monetary Policy Committee (MPC), cautioned. That inflation would persist. Mann stated: “Goods and services prices were set to rise again, and wage pressures in the economy could take years to dissipate.”
Moving forward, increased volatility is expected in the
Pound Sterling, as July’s UK Consumer Price Index (CPI) data is scheduled for release on Wednesday. The CPI report is expected to indicate that core inflation. Which excludes volatile food and energy costs, fell to 3.4% from the previous release of 3.5%.
Daily summary market movers: Pound Sterling gains during busy UK/US inflation week.
The pound sterling advances versus the US dollar (USD) during Tuesday’s European trading hours. The GBPUSD pair reaches a new weekly high above 1.2800. As the British currency capitalizes on positive labor market statistics. Meanwhile, the US dollar stays flat, with investors looking ahead to the July CPI data for the United States (US). Which will be released on Wednesday.
The US Dollar Index (DXY), which tracks the value of the greenback against six major currencies, remains above 103.00.
US CPI report is likely to indicate that monthly headline and core inflation both increased by 0.2%.
The US CPI report is likely to indicate that monthly headline and core inflation both increased by 0.2%. The annual headline and core CPI are expected to have decreased by one-tenth, to 2.9% and 3.2%, respectively.
An predicted drop in US pricing pressures would raise expectations of a significant interest rate lowering announcement by the Federal Reserve (Fed). According to the CME FedWatch tool, traders expect a 49.5% possibility that interest rates would be cut by 50 basis points (bps) in September, down from 68% a week ago.
Investors are waiting for July inflation statistics from both the UK and the US, which will be released on Wednesday.
Market anticipation of a significant Fed rate decrease in September has diminished. Due to diminishing US recession fears. Which were sparked by a persistent increase in In July, the unemployment rate and labor demand slowed.
According to UBS Global Research’s aggregate recession probability model. The likelihood of the US economy entering a recession fell to 53% in July, from 60% a few months before.
The US Dollar will be influenced on Tuesday by the July US Producer Price Index (PPI) data, which will be released at 12:30 GMT. The report is expected to reveal both headline and core PPI have increased at a slower rate on a monthly and annual basis.
