Sterling Strengthens after U.S Inflation, UK Job Data
The British pound, or the sterling, rose to $1.344 after UK payrolls fell just 8,000 in July, the smallest drop since January and far better than forecasts for a 20,000 decline.
GBP/USD edging higher after the release of mixed UK labor market data and the latest US inflation figures. While signs of cooling employment growth in the UK were offset by robust wage gains, a softer US dollar following the CPI report helped keep the pair supported, as traders increased expectations that the Federal Reserve (Fed) will resume easing monetary policy as soon as September.
Previous months’ losses were also revised lower, suggesting the labour market may be weathering the Labour government’s £26 billion tax hike better than expected.
Job vacancies were at their lowest level since the three months to April 2021, when the UK was dealing with the effects of the Covid pandemic. Outside the pandemic, the last time that vacancies were lower was in the three months to January 2015.
Liz McKeown, director of economic statistics at the ONS, said, “The number of employees on payroll has now fallen in 10 of the last 12 months, with these falls concentrated in hospitality and retail.
“Job vacancies, likewise, have continued to fall, also driven by fewer opportunities in these industries.”
Unemployment held at a four-year high of 4.7%, while private-sector wage growth eased slightly to 4.8% from 4.9% but remains well above the Bank of England’s comfort level for its 2% inflation target.
The data underscores the BoE’s challenge in balancing sticky inflation with signs of labour market weakness after last week’s close vote to cut rates by 25 bps. Investors now look to Q2 GDP, expected to show just 0.1% growth.
The US Consumer Price Index (CPI) rose 0.2% MoM in July, keeping the annual rate steady at 2.7%, in line with expectations. However, core CPI accelerated to 3.1% YoY from 2.9% in June, driven by higher housing, transport, and medical care costs.
While the firmer core reading tempers prospects for aggressive Federal Reserve easing, markets still expect a September rate cut. The CME FedWatch Tool shows a 94% probability of a 25 basis point cut in September, up from 84% earlier in the day.
On trade, President Trump extended the US–China tariff pause by 90 days. Geopolitically, US President Trump and Russia’s Vladimir Putin will meet Friday in Alaska in an effort to broker a Ukraine peace deal. #Sterling Strengthens after U.S Inflation, UK Job Data British Pound Declines to $1.34 Ahead of Job, GDP Data
