Pound to Dollar Rate Buoyed by UK Employment Data

The pound has been relatively rangebound of late, and as England entered the third stage of the easing of lockdown rules yesterday – the most significant relaxation of restrictions since the summer – it continued to trade at the 1.40 level against the dollar.

England entered stage three of the government’s roadmap out of lockdown, meaning pubs and restaurants could open indoors, and groups of six people or two households can mix indoors. Additionally, the ban on overseas holidays was lifted for “green list” countries, with no quarantine required upon return. However, Boris Johnson warned that a “heavy dose of caution” is required as fears mount that a surge in cases could delay further freedoms.

The recent boom in house prices has continued gathering pace, with a new national record posted in May for the price of property coming to market. Rightmove’s House Price Index showed the cost of the average property rose to £333,564 this month – an increase of 1.8%.

Official figures released by the office for National Statistics (ONS) this morning showed that the UK’s unemployment rate surprised everyone by falling to 4.8% during the January-March period, when the nation was in the grips of tight lockdown restrictions. Economists had forecast the rate to hold steady at 4.9%.

Further data for last month from the ONS showed an additional improvement in the UK labour market, with the number of employees on company payrolls increasing by 97,000 from March as businesses began to reopen. Consequently, the number of people on payrolls compared with February 2020 – before the Covid-19 pandemic hit the UK – reduced to 772,000.

The upbeat numbers this morning pushed the pound vs dollar rate up to its highest level (1.417) since 25 February.

Dollar

The dollar received a boost yesterday morning as fresh Covid-19 restrictions in Asia and mixed economic data from China made its safe-haven status appealing. This was a welcome turn of events for the US currency, which struggled to get out of first gear last week. It was short-lived, however, as Treasury yields stalled due to fresh expectations that US interest rates will remain low for a prolonged period – providing the pound to dollar rate with extra impetus.

Looking ahead

The latest Consumer Price Index is scheduled for release from the UK economy tomorrow morning – a key indicator to measure inflation and changes in purchasing trends.

Slated for release from the US today are Building Permits and Housing Starts – both for April.

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