Pound Falls as Labour Market Data Signals Slowing Economic Momentum

The British pound fell by 0.1% against the US dollar to $1.352 on Tuesday, following fresh labour market data from Britain that showed softer hiring conditions and slower wage growth.

The Office for National Statistics reported a UK unemployment rate of 4.9% in June, which was higher than economists' expectations of a fall to 4.8%. This adds to signs that domestic economic momentum is easing, even as the currency remains near recent highs.

Job vacancies fell to 707,000 in the three months to July, marking the lowest level since 2021 and signaling weaker labour demand. Private sector regular earnings rose 2.8% year-on-year in the three months to June, but this was the weakest growth since October 2020.

The softer labour figures support expectations that the Bank of England will keep interest rates on hold until next spring, according to James Smith, developed markets economist at ING. He notes that the broader picture is one of a cooling jobs market, barring a severe and persistent spike in energy prices.