Good morning,

After a quiet start to the week for sterling, the UK started early today by releasing its June unemployment and average wage numbers at 7am. In a pre-Covid world, jobs figures would be closely scrutinised to ascertain the implied health of the UK economy, with the wages providing the Bank of England with critical price information to link to its inflation targets. Although this morning’s unemployment numbers were revised down, in a Britain that currently holds 9.6 million jobs in furlough, job numbers are now far less important to the foreign exchange markets – until September when the furlough scheme starts to be phased out – as the rate is being kept steady by Government funding.

The wage figures on the other hand were more noteworthy, as mentioned in Jack’s update yesterday, the Bank of England has been supporting the pound of late by announcing that it had no interest in sending rates negative for the foreseeable; if wage growth continues to reverse (-1.2%) the BoE may have the wind knocked out of its sails come August’s release.

Ultimately, the importance of data releases, especially jobs figures, will steadily become more important as the furlough scheme sees a reduction in Government contributions, before ending altogether. One doesn’t have to spend long looking for headlines of another retail giant or holiday maker going into administration, which have steadily increased in appearance from later July and into August when the Government announced changes to the scheme. For now, the pound is holding fantastic levels against the dollar and fair value against a strong Euro, with 1.30 and 1.11 being available respectively for our clients here at WorldFirst. However, considering the rickety scaffolding that furlough offers the UK economy and sterling; the following months could remove some of the blinkeredness within pound sentiment and show the economy for what it really is: sinking into slow subsidence.

Have a great day

Author: Joshua Haden-Jones , Senior Relationship Manager

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