UK Labor Market Data Limits Pound's Losses
UK labor market data limited the losses of the British pound against most currencies, as the unemployment rate in the United Kingdom decreased during the three months ending in July, while wage growth fell to its lowest level in two years, indicating continued cooling in the UK's labor market.
Data released today by the Office for National Statistics showed that the unemployment rate fell to 4.1% in the three months to July, down from 4.2% in the previous period, in line with expectations.
The annual growth in average earnings excluding bonuses was 5.1% during the same period, as expected, but lower than the 5.4% recorded in the previous period. This reading represents the weakest since 2022.
Meanwhile, wages, including bonuses, rose by 4.0% year-on-year, following a 4.6% increase in the three months ending in June. This reading was also lower than the expected 4.1%.
The continued slowdown in wage growth will likely be welcomed by the Bank of England as a sign of further weakening in the labor market, which will help contain inflation.
However, despite the weakening wage growth and the Bank of England's positive reception of this development, it does not necessarily mean that the central bank will cut interest rates by 25 basis points during its meeting on September 19.
Additionally, data showed that the number of job vacancies decreased for the 26th consecutive quarter, falling by 42,000 to 857,000 in the June-August period.
The number of payrolled employees fell by 59,000 in August compared to the previous month but increased by 122,000 from the previous year, reaching 30.3 million employees.
Nearly 42,000 working days were lost due to labor disputes in July, with most strikes occurring in the health and social care sectors, potentially impacting the data released today.
Following the economic data, the GBP/USD pair recorded a temporary rise, reaching a daily high of 1.3107. However, failure to stabilize above the 1.3100 level throughout the day may push the pair to fall back to 1.3060, followed by 1.3000.
Markets are now awaiting the release of monthly GDP data tomorrow at 6:00 AM GMT, with expectations of 0.2% monthly growth. Should the reading fall below expectations, the British pound could continue its current decline.
