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Sterling holds at five-month low after UK labour data

Published 04/16/2024, 02:10 AM
Updated 04/16/2024, 05:40 AM
© Reuters. FILE PHOTO: Woman holds British Pound banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
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By Anna Pruchnicka

LONDON (Reuters) -Sterling stayed at a five-month low versus the dollar on Tuesday, after data showed Britain's unemployment rate rose by more-than-expected.

The pound was last flat on the day against the dollar at $1.24475, having touched its lowest since Nov. 17, earlier in the session.

It was also steady versus the euro, which stood at 85.36 pence.

The UK unemployment rate in the three months to February rose to 4.2% from 3.9%, although the Office for National Statistics said there was still some volatility in its data as it overhauls its survey which produces the figure. A Reuters poll of economists had forecast the February figure at 4%.

Regular wages excluding bonuses grew by 6.0% compared with the same period a year earlier, easing from an increase of 6.1% in the November-to-January period.

"The labour market is clearly cooling. Wages take more time to react, but they're also slowing," said Kenneth Broux, head of corporate research, FX and Rates at Societe Generale (OTC:SCGLY).

"I think the drop in employment is good news for those at the Bank of England who are going to vote for rate cuts. And so in that context, again, relative to the Fed, it's not good news for the pound against the dollar," he added.

Inflation due on Wednesday will be another data point that investors will be looking at for clues on the path of the BoE's rate cuts, with markets pricing August as the most likely start date for policy easing.

© Reuters. FILE PHOTO: Woman holds British Pound banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

Money markets are currently expecting about 46 basis points of interest rate cuts by the BoE this year, according to LSEG data, with a first cut in August seen as more likely than not, but not fully priced.

The higher-than-expected U.S. inflation figure last week has caused markets to scale back expectations of the first Federal Reserve cut even further, with expectations of the first rate cut moving from June to September.

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