The British pound strengthened against most major currencies in the European session on Tuesday, after data showed that the nation’s unemployment rate fell slightly in three months to August, while it was forecast to remain unchanged.
Data from the Office for National Statistics showed that the U.K. unemployment rate fell slightly to 4.0% in three months to August, while it was forecast to remain unchanged at 4.1%.
Payroll employment decreased by 15,000 from the prior month to 30.3 million in September.
U.K. wage growth softened to the lowest in more than two years in the three months to August, adding support to expectations that the central bank will cut interest rates further at the next meeting.
In the three months to August, average earnings excluding bonus increased 4.9% from the previous year, slower than the 5.1% increase in the three months to July.
This was the slowest rise since June 2022 and also matched expectations. European stocks traded higher amid investor optimism about corporate earnings.
After beats by JP Morgan and Wells Fargo, the focus now shifts to earnings from Bank of America, Citigroup, Goldman Sachs, Johnson & Johnson, UnitedHealth, and Walgreens later in the day.
Thursday’s ECB meeting also remains on investors’ radar, with the central bank likely to deliver another interest rate cut after recent data signaled continued weakness in the eurozone economy.
In European trading today, the pound rose to nearly a 2-week high of 0.8336 against the euro and a 5-day high of 1.3087 against the U.S. dollar, from early lows of 0.8352 and 1.3035, respectively. If the pound extends its uptrend, it is likely to find resistance around 0.81 against the euro and 1.34 against the greenback.
Against the Swiss franc, the pound edged up to 1.1276 from an early low of 1.1248. The pound may test resistance around the 1.13 region.
Meanwhile, the pound dropped to 194.67 against the yen, from an early high of 195.68. The next possible downside support for the pound is seen around the 192.00 region.
Looking ahead, Canada CPI data for September, the U.S. NY Empire State manufacturing index for October, the U.S. Redbook report, and U.S. consumer inflation expectations for September are set to be released in the New York session.
Conclusion
The British pound’s recent strengthening is a positive sign for the U.K. economy, especially following the slight dip in unemployment and the softening wage growth reported by the Office for National Statistics.
While the unemployment rate improved to 4.0%, the wage growth slowdown suggests reduced inflationary pressures, fueling speculation that the Bank of England may ease interest rates soon.
This economic data, along with strong corporate earnings in Europe and the U.S., has boosted investor optimism, although upcoming events such as the ECB meeting and further U.S. economic data will remain crucial for market direction.
The pound’s rise against major currencies shows resilience, but upcoming central bank decisions will likely play a key role in determining its future path.
Via RTTNews