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Sterling holds steady, unaffected by reopening delay; UK employee numbers jump

Sterling holds steady, unaffected by reopening delay; UK employee numbers jump
Sterling holds steady, unaffected by reopening delay; UK employee numbers jump   -   Copyright  Thomson Reuters 2021
By Reuters

LONDON – The pound was steady in early London trading on Tuesday, holding firm above $1.41 and showing no reaction to a delay in the UK’s lockdown easing plan, while investors took confidence from jobs data showing a record jump in employee numbers in May.

Currency markets were generally quiet ahead of the U.S. Federal Reserve meeting, which ends on Wednesday.

The pound was up less than 0.1% against the dollar, at $1.41180 at 0747 GMT.

Versus the euro, it was down around 0.1% at 86.03 pence per euro.

Jobs data released earlier in the session showed that the number of employees on British company payrolls surged by a record amount in May as pandemic restrictions eased – though it was still more than half a million below its pre-pandemic peak.

The figures also showed that wages grew at their fastest since 2007 in the year to April.

“The key point in my view is the much-higher-than-expected rise in wages. This is bound to be a point of discussion at next week’s Bank of England meeting,” wrote Marshall Gittler, head of investment research at BDSwiss, in a note to clients.

“It’s positive for GBP as it makes normalization of monetary policy more likely.”

The Bank of England’s next policy meeting is on June 24.

REOPENINGDELAY

The pound was unaffected by news that the UK is set to delay its reopening from COVID-19 lockdown restrictions by one month due to the rapid spread of the more infectious Delta variant.

Most restrictions were due to lift on June 21, but this much-anticipated step was pushed back to July 19.

But analysts remained optimistic on the pound’s prospects.

“We think that a delay in the full re-opening does not materially change the positive underlying economic recovery narrative for sterling, and data released this morning continued to endorse such narrative,” wrote ING strategists in a note.

MUFG currency analyst Lee Hardman said that he is maintaining a bullish view on the pound versus the dollar “in the belief that the economic outlook over the near-term will trump certain near-term risks that have emerged” relating to the Delta variant.

Speculators’ increased their net long position on the pound – bets that the pound will go up – in the week to June 8, CFTC data showed.

Sterling was also unaffected by news on Tuesday that the UK said it had agreed a trade deal with Australia.

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