Anna Pruchnitskaya
LONDON (Reuters) – Sterling stood at a five-month low against the dollar on Tuesday after data showed Britain’s unemployment rate rose more than expected.
The pound was last unchanged against the dollar on the day at $1.24475, hitting its lowest level since Nov. 17 earlier in the session.
It also remained stable against the euro, which stood at 85.36 pence.
The UK unemployment rate rose to 4.2% in the three months to February from 3.9%, although the Office for National Statistics said there was still some volatility in its data as it revised its research that produced the figures. A Reuters poll of economists had forecast the February rate at 4%.
Regular pay, excluding bonuses, rose 6.0% from the same period a year earlier, down from a 6.1% rise in the November-January period.
“The labor market is clearly cooling. Wages are taking longer to react, but they are also slowing,” said Kenneth Brough, head of corporate research for foreign exchange and rates at Societe Generale (OTC:).
“I think the fall in employment is good news for those at the Bank of England who are going to vote to cut rates. And so in that context, again, compared to the Fed, this is bad news for the pound versus the dollar. ” he added.
Inflation data due on Wednesday will be another indicator investors will look to for clues on the path ahead for the Bank of England’s rate cuts, with markets pricing August as the most likely date for policy easing to begin.
Money markets are now expecting the Bank of England to cut interest rates by around 46 basis points this year, according to LSEG, with the first cut in August considered more likely than not but not yet fully assessed.
A higher-than-expected U.S. inflation figure last week caused markets to further lower expectations for the Federal Reserve’s first rate cut, with expectations for the first rate cut pushed back from June to September.