On Thursday, the pound sterling gained against the euro after data on the UK labor market showed that the cooling trend, which worried some policymakers, was less severe than in the previous report. The euro fell 0.22% against the pound to 86.52 pence, easing pressure on the Bank of England to accelerate its rate of interest rate cuts and supporting the pound.
On Thursday, data on the UK labor market presented a mixed picture.
Annual wage growth for the three months to May fell to 5.0%, the lowest level since the second quarter of 2022, but still slightly exceeded the median estimate of 4.9% of economists surveyed by Reuters. Furthermore, previous data showing a dramatic decrease of 109,000 people in company payrolls in May has been revised to a decrease of only 25,000 people.Deutsche Bank UK Chief Economist Sanjay Raja said, “Today’s labor market report shows that the easing trend in the labor market continues. However, the labor market looks better than last month.”
With the UK inflation data released on Wednesday exceeding expectations, this labor market data puts the Bank of England in a difficult position regarding how to cope with slowing employment while fighting inflation.
ING Advanced Markets economist James Smith said, “This temporarily eases the pressure on the Bank of England to make faster interest rate cuts.” The pound strengthened against most currencies except the euro, but fell 0.15% against the dollar to $1.1340. On Wednesday, news that US President Donald Trump would soon dismiss Federal Reserve Chairman Jerome Powell led to a drop in the dollar. Although Trump later stated that he did not plan to dismiss Powell, he did not completely rule out the possibility and criticized the central bank governor for not lowering interest rates.
