UK Unemployment Drops, So Why Didn?t the Pound Sterling (GBP) Exchange Rate Climb?

On Wednesday the UK published its latest batch of employment figures. They revealed that the UK Unemployment Rate softened to a six-year low of 6%, the lowest level of joblessness recorded since the global financial collapse was triggered in 2008. On the surface the results were very positive, so given that the labour market is such an important aspect of the UK economy, why didn’t the Pound Sterling exchange rate jump after the report was released?

Pound weakness persisted in the aftermath of the data release for several reasons. Firstly, the rate of employment growth slowed considerably in the three months to August, with the number of jobs added falling from 74,000 to 46,000. Secondly, UK Average Weekly Earnings are still coming in well below the rate of inflation, putting pressure on consumers and making it increasingly unlikely that the Bank of England will raise interest rates in the spring of next year, as was previously forecast.
The Pound Sterling exchange rate was also trending lower as a result of Tuesday’s UK inflation figures. Consumer price gains in the UK were shown to have slowed to 1.2% in September, moving further away from the BoE’s 2% target and adding to the case for leaving borrowing costs on hold for the time being.

There were positives to the employment data but as industry expert Simon Walker comments; ‘A relatively high level of employment during the recession was the silver lining to an otherwise very dark cloud, and we know that many businesses did all they could to keep people in work. The challenge now is to ensure that the productivity of the labour force increases and that economic growth is felt in peoples’ pockets. The case remains that too many people still at present feel the effects of recession more keenly than the benefits of recovery.’

Although the Pound did initially strengthen against the majority of its currency rivals in the wake of the unemployment figures, the British currency later weakened by over 0.6% against the Euro (GBP/EUR), New Zealand Dollar (GBP/NZD) and Australian Dollar (GBP/AUD). The Pound’s 0.3% advance against the US Dollar was only made possible by the US publishing a disappointing Retail Sales report.

As this report shows, exchange rates are highly volatile and don’t always act in the way you’d expect. If you’ve got an international money transfer coming up you may want to get in touch with a reputable currency broker. They will be able to keep you informed of all the latest market movements and currency trends and provide invaluable guidance when it comes to picking the most lucrative time to trade your Pound Sterling (GBP) for Euros (EUR), US Dollars (USD) or Australian Dollars (AUD).