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Pound may exceed year-highs on strong UK labour data

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Sterling remains the top-performing currency of the year to date, but the first key test of the month is the UK labour market data due out on Tuesday.


Last week the Pound to Euro exchange rate hit highs close to 1.1735 before edging back to just under 1.17 at the time of writing. 


Whereas the Pound to Dollar rate reached a high of 1.2850 yet could surpass new year-highs on the back of strong UK jobs data.


The figures will likely reiterate Britain's labour market remains tight as job creation continues alongside low unemployment rates, confirming wage growth stays over the Bank of England's inflation target of 2.0%, Pound Sterling Live reports.


Markets forecast the Bank of England will hike rates by an additional 150 basis points to curb inflation, which has supported the Pound.


"The MPC will be under pressure to keep hiking until it sees clear evidence that wage growth is beginning to cool. If the MPC doesn't push back against these pressures forcefully enough, the risk they persist will increase," said Andrew Goodwin, Chief UK Economist at Oxford Economics.


Employment is forecast to have risen by 158,000 in the three months to May to maintain the employment rate at 3.8%. In addition, the average earnings index (with bonuses) is predicted to have increased 6.8% in May, a rise from 6.5%, whilst average earnings with bonuses are forecast to have increased 7.1% in May, a fall from the previous 7.2% reading.


Should the figures exceed expectations, UK bond yields will likely continue moving upwards, highlighting the market's forecast for more rate hikes by the Bank of England, which can provide support for Sterling.


However, according to Chief UK Economist at Pantheon Macroeconomics, Samuel Tombs, the UK's labour market may reveal a loss of growth momentum in employment and wages. 


"While the slowdown won't be severe enough to stop the MPC in its tracks, it should lay the foundations for the Committee to end its rate hiking cycle in November, by which time more evidence that labour market slack is accumulating will have emerged," he commented.

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About

deVere Group – Foreign Exchange’s Public Relations Department deals with all areas of the media and external communications including international, national, regional, local, trade, consumer, print, broadcast, social and online. The Department aims to provide a helpful service to journalists, broadcasters and editors, amongst others, and reply to all media enquiries, including urgent enquiries out of hours, within agreed deadlines.

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Our press office does not have access to client details and will not be able to assist with individual client enquiries. Please contact deVere Group – Foreign Exchange’s Head of Public Relations on [email protected] or call +44 2071220925.