Unemployment fell to 4.7% in June to August, from 4.9% in May to July. Annual pay growth excluding bonuses reached 3.7%, above the 3.6% expected in a Reuters poll.
Pay and Hiring Send Different Signals
Regular pay growth edged up from an upwardly revised 3.6% for May to July. However, total earnings growth, which includes bonuses, slowed to 3.7% from 3.9%.
Other indicators also gave a mixed picture. September payroll employment provisionally increased by 13,000, while vacancies fell to 691,000 in July to September, down 21,000 from April to June.
The Office for National Statistics advises caution when interpreting short-term changes in its Labor Force Survey. The unemployment decline therefore needs to be assessed alongside payrolls, vacancies, and the broader trend.
Rate Expectations Support the Pound
Bank Rate remains at 3.75%, with the next decision scheduled for November 5. Investors already expect an increase to 4%, making the implications for subsequent decisions important.
Firmer pay can make policymakers more cautious about allowing inflation to become embedded. A more resilient labor market could also give them greater room to tighten policy without immediately threatening employment.
Higher expected UK interest rates can support sterling by improving prospective returns relative to other currencies. However, confirmation of an already anticipated increase may have less impact than evidence that the wider rate outlook is changing.
What Could Inflation Change on Wednesday?
September’s inflation report is due on Wednesday, October 21, at 7:00 a.m. British Summer Time. Economists polled by Reuters expect annual consumer price inflation to rise to 3.4% from August’s 3.1%.
The composition of that increase will matter. Persistent services inflation or broader underlying price pressures could strengthen the case for tighter policy beyond an initial response to higher energy costs. Core inflation, which excludes energy, food, alcohol, and tobacco, will help investors assess how widely those pressures extend.
A stronger-than-expected release could support the pound if investors raise their expectations for UK rates relative to those elsewhere. The scale of any gain would depend on how much tightening is already priced in.
Conversely, softer inflation could temper those expectations and leave sterling vulnerable to giving back part of its advance. For traders, the key test is whether Wednesday’s figures change the expected policy path enough to sustain the currency’s momentum.
Warning! This material is not intended as investment advice. Past performance data does not guarantee future returns. Investing in foreign currencies may affect your returns due to their fluctuations. Any transaction in securities may result in both profits and losses. The assumptions and expectations set forth in this material are only estimates that may not be accurate and may change depending on current economic conditions. These statements do not guarantee future returns.
WTI returns below $100, and Brent retreats from a five-month high as investors reassess supply prospects following U.S. sanctions relief for Russia. The immediate question is whether additional fuel exports can offset persistent disruptions in the Middle East.
Leer más →Las acciones indonesias caen hasta un 11,4 % después de que MSCI propusiera excluir al mercado de su clasificación de mercados emergentes. La pregunta que surge de inmediato es cuánto capital podría salir del país si se le asignara la categoría de mercado independiente.
Leer más →