Pound Sterling Mixed Vs Euro And Dollar After Weaker UK Labour Report

The British Pound Sterling was mixed against the euro and US dollar on Tuesday as GBP investors digested a fresh batch of UK labour-market data that broadly reinforced expectations for a cautious Bank of England easing cycle rather than imminent follow-up cuts.

Pound Sterling was weaker against most European currencies but held firm against the dollar, with GBP/EUR slipping to 1.1468, while GBP/USD edged up to 1.3461.

UK data showed a slightly softer tone overall, but not one that would force the Monetary Policy Committee to accelerate easing plans.

Employment growth rebounded on the official LFS measure, with employment rising by 82,000 in the three months to November after a fall the previous month, while the unemployment rate held steady at 5.1%.

By contrast, the more timely payrolls series painted a weaker picture, showing a 43,000 decline in December, larger than forecast and marking another month of job losses.

Pantheon Macroeconomics argues this divergence is likely to keep policymakers cautious rather than alarmed.

Rob Wood says the data are “dovish enough” to justify another rate cut later in the spring, but not weak enough to require urgent action in February.

In his view, the figures are consistent with the MPC waiting until April before easing again.

Pantheon highlights that payrolls remain unusually weak relative to business surveys, raising doubts about how much weight the Bank should place on recent headline declines given the scale of past revisions by the ONS.

Other indicators suggest the labour market is stabilising rather than deteriorating further.

Redundancies fell back in November, vacancies ticked higher in the three months to December, and claimant-count data continue to show fewer people out of work compared with a year ago once revisions are taken into account.

Wage data delivered a similarly nuanced message.

Headline earnings growth eased only marginally, but private-sector pay excluding bonuses, the metric most closely watched by the MPC, slowed to 3.6%, undershooting expectations.

Pantheon cautions, however, that this slowdown was flattered by compositional effects and that underlying pay growth shows little further deceleration once these are stripped out.

Measures such as PAYE median pay and survey-based indicators point to earnings growth remaining above rates consistent with the Bank’s inflation target.

Taken together, Pantheon concludes that the latest release supports a gradual easing path rather than a rapid sequence of cuts.