Daily Market Report - 17/05/2022
Sterling rises as unemployment falls
GBP has risen against both the Euro and Dollar this morning, following the release of UK labour market statistics that revealed a strong jump in wages and a stronger than expected fall in unemployment.
The UK added 83K jobs in the three months to March, according to the ONS, which was significantly more than the 5K the market was expecting. Despite a slowdown in growth for March, the UK's labour market continues to flourish, with record vacancies and job movements. This was made evident as the unemployment rate unexpectedly fell to 3.7% from 3.8% - the lowest level since 1974. While the unemployment rate dropped to 3.7%, the number of job vacancies in February to April 2022 rose to a new record of 1,295,000. That’s 33,700 more than in the previous quarter and an increase of 499,300 from the pre-pandemic level in January to March 2020.
Although the unemployment figures are encouraging, figures released by the Office for National Statistics show that regular pay is lagging behind inflation. Statistics show that regular pay rose by 4.2% per year in the three months to March. That means basic pay shrank in real terms, as CPI inflation hit 7% in March, and may have soared over 9% in April.
In wake of these data releases, Sterling reacted by sky rocketing to 1.1858 versus the Euro, an increase of 0.45% from open, and the GBP/USD rate rose 0.72% to currently trade at 1.2416.
Bank of England Governor Andrew Bailey told members of Parliament's Treasury Select Committee on Monday the Bank continues to expect unemployment to rise in coming months as the effects of a slowing economy become more keenly felt. The assumption is that inflation - which is expected by the Bank to go as high as 10% - will eventually stall economic growth as consumers are forced to become more conservative.