Pound Strengthens to Two-Month High
The pound sterling (GBP) rose to its highest level in more than two months against the US dollar on Tuesday following the release of UK employment data for the three months to July. The ONS reported the unemployment rate remained at 4.7%—a four-year high—while wage growth slowed to 4.8% (excluding bonuses) and 4.7% (including bonuses), in line with market expectations.
The "in-line" data performance helped ease the Bank of England's concerns about the labor market, but the relatively high pace of wages has made the central bank more likely to hold its benchmark interest rate at 4.0% in its Thursday decision. This "hold rate" expectation is also reflected in the latest economist poll.
The next focus is the UK CPI for August, released Wednesday. Consensus expects headline inflation to edge up to around 3.9% (y/y). A higher-than-expected figure could strengthen the case for holding rates longer and support the GBP, while a more subdued result could pressure the pound. In the forex market, GBP/USD briefly broke through its highest level since early July above 1.36 during the European session, reflecting positive sentiment post-data. GBP volatility is likely to increase until the CPI announcement and the BoE decision.
Key points:
Unemployment remains at 4.7% (a 4-year high); wages: 4.8% ex-bonus, 4.7% including bonus.
GBP hits a more than 2-month high versus the USD after the data release.
The BoE is expected to hold interest rates at 4.0% on Thursday.
August CPI (Wednesday) is projected at ~3.9% y/y—key to GBP's next direction. (ayu)
Source: Newsmaker.id
