Pound to Dollar Rate Digests Better-Than-Expected UK Jobs Data

The pound held steady against the dollar on Monday after data on Friday showed a plunge in US consumer confidence, raising concerns about the nation’s recovery from Covid-19. And without any economic indicators to write home about yesterday, last week’s figures from the US economy were still influencing the pound vs dollar rate. This brought a raft of releases from the UK into sharp focus for investors on Tuesday morning.

The number of workers on British company payrolls increased by 182,000 in July, as the economy continued to rebound from draconian lockdown restrictions, data from the Office for National Statistics (ONS) showed on Tuesday. According to the ONS, the headline unemployment rate for the three months to June dropped to 4.7% – missing economists forecast that the rate would hold steady at 4.8%.

The ONS figures also showed signs of inflation pressures from rising wages, with average earnings in the three months to the end of June jumping by a record 8.8% from a year earlier. While the data partly reflects anomalies generated by the pandemic, underlying wage pressures also are accelerating. The surge underscores the pace of the recovery from the deepest economic dip in 300 years.

The UK claimant count rate – the change in the number of those claiming jobless benefits – declined to 5.7% in July from 5.8% in June.

Jonathan Athow, deputy national statistician for economic statistics at the ONS, said: “The world of work continues to rebound robustly from the effects of the pandemic.”

Rishi Sunak said in a statement on Tuesday: “Our plan for jobs is working, saving people’s jobs and getting people back into work,”. The Chancellor of the Exchequer added: “There could still be bumps in the road, but the data is promising.”

Despite the better-than-expected UK jobs data, the pound to dollar rate slipped lower on Tuesday morning, threatening to dip below the 1.38 level.

Looking ahead

A busy week in the domestic data calendar is expected to affect the pound, with investor focus switching to inflation data for July on Wednesday and retail sales data on Friday.

The release of the Fed minutes on Wednesday will influence the short-term outlook for the dollar, especially if the central bank confirms more policymakers are considering dialling back its bond purchase programme by the end of the year. Before then, the latest retail sales figures are scheduled for release by the US Census Bureau – and are forecast to decline.

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