Pound Sterling (GBP) Exchange Rate Outlook Buoyed by UK Jobs Data

September 14, 2016 - Written by Frank Davies

STORY LINK Pound Sterling (GBP) Exchange Rate Outlook Buoyed by UK Jobs Data

Pound Sterling (GBP) Exchange Rates Recover from CPI Losses

After sliding in response to the UK's latest inflation data, Pound Sterling (GBP) exchange rates stabilised slightly following the release of domestic jobs numbers, although the currency remained trending slightly lower vs the Euro (GBP/EUR) and US Dollar (GBP/USD).

The latest snapshot of Britain’s jobs situation suggests that the domestic labour market is holding up well in the wake of June’s surprise European Union referendum result.

UK Labour Market Resilient Post-Brexit, Supportive of Long-Term GBP EUR, GBP USD Exchange Rates

The proverbial Doomsayers were lining up to forecast a collapse for both the UK economy and for Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates in the weeks following the shock decision by the British people to Brexit. However, today’s figures, which pointed to a slight fall in the overall level of UK joblessness to 1.63 million, provided further evidence that those predicting the demise of UK PLC might well be proved wrong. The Office of National Statistics (ONS), which publishes the official figures, summed up the current position in its report accompanying the release, stating that,

‘between February to April 2016 and May to July 2016, the number of people in work increased. The number of unemployed people and the number of people not working and not seeking or available to work (economically inactive) fell.’

Is the Outlook Positive for Pound Sterling (GBP) Exchange Rates?

While the Pound failed to mount an advance on either the Euro (GBP/EUR) or US Dollar (GBP/USD) following the publication of the jobs data, the report does give investors reason to hope.

The latest weekly earnings figures, also published by the ONS today, were particularly encouraging for holders of Sterling-denominated assets. Economists have referenced the minimal increases in the average British worker’s take-home pay since the 2007-09 financial crisis as a drag on growth levels in the real economy, but today’s data suggested the trend may be reversing, with the rolling quarterly figure for July showing at a better-than-anticipated 2.3% and June’s counterpart figure being upwardly revised to 2.5%.

Breaking down these earnings figures, the ONS observed that,

‘Looking at longer term movements, since comparable records began in 2000 average total pay for employees in Great Britain in nominal terms increased from £311 a week in January 2000 to £505 a week in July 2016; an increase of 62.0%. Over the same period the Consumer Prices Index increased by 39.9%.’

BoE Interest Rate Decision Keeps Pressure on Pound Sterling (GBP) Exchange Rates Today

In spite of the go-ahead UK jobs numbers, Pound Sterling (GBP) exchange rates have struggled to break into positive territory against the other major global currencies on the day as investors fretted about the possible content of tomorrow afternoon’s Bank of England (BoE) monetary policy announcement. Analysts forecast that the BoE may strike a negative tone regarding Britain’s future economic prospects.

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