Yesterday’s UK labour market data should play into the Bank of England’s hands, as the unemployment rate surprisingly fell and wage pressures eased at the same time. The British Pound (GBP) initially benefited from these figures, but was unable to hold on to all of its gains against the Euro. This should come as no surprise, as inflation numbers are likely to be more important for the GBP this week, starting with today’s July inflation figures, notes Michael Pfister, FX Strategist at Commerzbank.
Inflation may be a positive sign for GBP
“The Bloomberg consensus expected the core rate to fall slightly year-on-year, and it did, but this was likely due to a base effect, as a sharp increase in July last year is no longer included in the calculation.”
“And there were good reasons for this view. For example, house prices have recently risen more than before and the real economy appears to be continuing its slow recovery, arguing for stronger inflationary pressures. Moreover, most of the recent disinflation in the underlying rate has come from durable goods, and the trend there has reversed in recent months. We see similar trends in other countries.”
“In summary, today’s figures support those (like us) who expect interest rates to remain unchanged in September and would be another positive signal for GBP.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
