The pound was last down 0.5% against the dollar at $1.3488
International news via Reuters:
The British pound fell against the dollar and the euro on Tuesday as soft UK labour market data bolstered investors’ bets for more rate cuts this year from the Bank of England.
Pay growth slowed sharply while the unemployment rate rose to its highest level in nearly four years in the three months to April, Britain’s Office for National Statistics said.
The downturn appeared to gather pace in May as more timely tax office data showed a slump of 109,000 in the number of employees on company payrolls, the biggest decline since May 2020 at the height of the COVID-19 pandemic.
“The latest official read on UK labour market activity provided broad confirmation that conditions were easing,” said Nikesh Sawjani, senior UK economist at Lloyds.
“Should the labour market continue to cool further in the coming months and quarters, consistent with the indication provided by a range of surveys, we believe that should give the Bank of England confidence to deliver further cuts in the Bank Rate over the next year or so.”
The pound was last down 0.5% against the dollar at $1.3488, having earlier dropped to its lowest since June 2 at $1.3458.
The Bank of England meets next week and although it is expected to stand pat on rates, money market traders added to bets for additional rate cuts this year.
Short-term rate futures priced in about 48 basis points of cuts by the end of the year, implying about two quarter-point cuts, compared with 39 bps before the data.
“This (labour market data) puts a question mark on the hawkish bias that we’ve seen from the Bank of England,” said Kirstine Kundby-Nielsen, FX analyst at Danske Bank.
“Markets are very firm that we won’t get a cut next week, and I think that’s definitely the case, but it can open the door when we get to the August meeting.”
The pound was down about 0.4% at 84.6 pence per euro, its weakest level against the single currency since May 9.
Reporting by Samuel Indyk; Editing by Susan Fenton
