The pound edged lower on Monday, moving further away from the one-week high it hit against the dollar on Friday. A quiet economic calendar left investors waiting for fresh data to assess the strength of the post-lockdown economic recovery and when interest rates could be increased. Inflation – which the Bank of England (BoE) expects to rise sharply and hit a peak of 4% this year – and retail sales figures will be published later this week.
Official jobs data arrived this morning. Employers added 241,000 staff to their payrolls in August. This pushes the total number of payrolled employees above levels seen in February 2020, the last full month before Covid-19 hit and the nation went into lockdown.
Separate data from the Office for National Statistics (ONS) showed the ILO Unemployment Rate – the number of unemployed workers divided by the total civilian labour force – was 4.6% in the three months to July, down 0.1% from the previous reading and in line with economists’ forecast. During this period, the number of people in employment – including the self-employed – increased by 183,000, broadly in line with forecasts.
According to the ONS, average weekly earnings during the same three-month period were 8.2% higher than the year before, although the figure was heavily distorted by the impact of the pandemic and furlough scheme.
The jobs data provides evidence of an ongoing recovery in Britain’s job market as the government reels in its furlough support programme, which will finish at the end of September.
By this morning, the pound vs dollar rate had managed to steady itself and edge up to the 1.38 mid-range.
Fed taper talk intensifies
The dollar began the new week on a firm footing as investors continued to speculate that the US Federal Reserve could dial back its asset purchases imminently, despite a surge in Covid-19 cases. A flurry of influential data sets from the US economy this week could reinforce the case for the Fed to taper stimulus as soon as next quarter. Tapering has the potential to boost the dollar as it represents a move toward tightening monetary policy.
US consumer price figures are due to be published today, which will provide an overview of the economy’s progress ahead of next week’s meeting of Fed officials. It’s the UK’s turn to publish its inflation figures tomorrow. If the Consumer Price Index signals robust inflation, expectations will mount that the BoE is poised to tighten its monetary policy quicker than the European Central Bank or Federal Reserve.