Sterling rises as UK unemployment data puts pressure on Bank of England

The pound rose on Tuesday after the UK released another set of strong employment data showing 160,000 jobs had been created in October.

Job openings also soared to a record high.

GBP/USD spiked higher by some 50 points to 1.3473 in the initial reaction to the news, before easing back to around 1.3450.

Having decided against hiking rates in their last meeting, the Bank of England will now be feeling the heat of soaring inflation and an economy that is facilitating a very healthy job market.

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“This data will put further pressure on the BoE and members of the MPC to make a decision around rising interest rates as Governor Andrew Bailey recently mentioned that the only missing economic data was how the UK labour market would react after the end of the furlough program,’ said Jesús Cabra Guisasola, Associate at Validus Risk Management.

The next instalment of jobs data will come just days before the Bank of England meet in December and will be one of the most anticipated readings of UK jobs activity in the last decade.

Despite Sterling’s jump this morning, the pound has been under pressure against the dollar since late October falling from highs around 1.3830. The pound had also fallen against the Euro in early November but has now recouped most of the losses.

“Sterling climbed against the dollar on the back of the positive data and is currently testing 1.345. Nevertheless, we continue being cautious around the UK economy as inflation continues rising, with Covid and the negotiations between the UK and EU also weighing on the pound to the downside,” Jesús Cabra Guisasola cautioned.

Whilst the news was positive for GBP and the UK economy, the FTSE 100 underperformed peers as the FTSE 100’s inverse relationship with the pound once more came into play.

“Holding the index back a bit was strength in the pound, hitting the relative value of its dominant overseas earnings, as stronger than expected unemployment figures suggested Bank of England Governor and ‘unreliable boyfriend’ Andrew Bailey might deliver the promised rate rise in December,” said AJ Bell investment director Russ Mould.

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