A difficult day for sterling saw a reversal of fortunes against the euro and US dollar as UK unemployment fell to a 6-year low of 6% but the expectations for UK interest rate rises receded ever further into the future. Following poor inflation data on Tuesday, sterling had an early-morning boost as unemployment fell more than forecast in September. Sterling did not see significant gains, however, as this headline figure masked a slowdown in the labour market. Average earnings only increased 0.7%, and jobless claims fell the least since April 2013.
Sterling was able to make significant gains against the US dollar following soft data released stateside. With retail sales falling more than expected, and a dramatic downturn in manufacturing sentiment, sterling briefly pushed back above 1.60 against the US dollar before being pegged back. Conversely, this same data saw sterling fall against the euro, as investors rallied behind the single currency’s strong performance, driving sterling lower.
It is a quiet day on the UK data front today, with labour data from the US providing the major interest in the afternoon. Any surprises could affect sterling performance.