Pound still struggling despite 42-year low unemployment

Mixed employment figures left the pound little changed on Wednesday, with GBP/EUR remaining at a five-week low.

GBP/EUR was fluctuating between €1.1642 and €1.1606, GBP/USD was trading between $1.2934 and $1.2977, GBP/AUD dropped from AU$1.7510 to AU$1.7350 and GBP/NZD dipped from NZ$1.8730 to NZ$1.8666.

Why is the pound down in the dumps this week? Keep scrolling to find out…

What’s been happening?

Yesterday was all about employment, with the UK releasing its jobs numbers for the three months through March.

The report revealed one exciting statistic (that the rate of unemployment was at a 42-year low) and one less cheery titbit (that British wages are enduring their worst decade since the era of Napoleon).

Concerns that higher inflation (in conjunction with sluggish wage growth) will restrain consumer spending and weigh on UK economic output left the pound weaker on Tuesday.Given the Bank of England’s recent comments about wages, the average earnings figures received more attention than the unemployment news and the pound failed to mount a lasting recovery.

The other big news item dominating headlines related to the undeniably controversial US President.

Donald Trump’s unceremonious sacking of FBI Director James Comey is coming back to bite him in a big way, with rumours of the President’s collusion with Russia and possible attempt to pervert the course of justice leading to calls for his impeachment.

All the Presidential drama reduced demand for the US dollar, leaving GBP/USD relatively stable.

What’s coming up?

So far this week none of the UK’s economic reports have given the pound much cause for cheer – but today’s retail sales numbers just might.

Consumer spending is believed to have increased by 1.0% on the month in April, a significant improvement on the -1.5% decline recorded in March. An unchanged year-on-year sales figure of 2.6% has also been forecast, while annual sales including auto fuel are projected to increase from 1.7% to 2.2%.

As the UK is so reliant on its services sector (it accounts for over 70% of total GDP) a solid rebound in retail sales could give the pound a little lift. However, with stagnant wage growth and soaring inflation expected to garrotte consumer spending in the months ahead, the pound’s gains may be limited.

Other news to look out for includes a speech from European Central Bank (ECB) President Mario Draghi and US initial jobless/continuing claims numbers.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Phil McHugh,
Trading Floor Manager

Phil provides dealing and hedging services whilst also helping to manage Currencies Direct overall market exposure.