Good morning,

The UK labour market had some good news yesterday with UK full-time employment back to pre-pandemic levels. Figures released by the ONS show unemployment falling from 4.7% to 4.6% in June as well as 183k jobs have been added in the UK from May to July. This data continues to support the expectation that the Bank of England will increase interest rates in the first half of 2022. This news continues to support the pound with GBP/EUR hitting highs of 1.1750 and  getting over 1.39 for the first time in a month.

We have seen some US Dollar weakness in the last 24 hours trigged by the worse than expected inflation figures. A few months back high levels of inflation were top of the Federal Reserve’s list of concerns.  CPI inflation rose 0.3% month on month for August below the consensus of 0.4% and core CPI inflation rose just 0.1% against an expected 0.3%. This may help to explain GBP/USD hitting highs of 1.3907 and strong UK employment mixed with worse than expected US inflation figures.

Boris Johnson reminded the UK yesterday that we are not over Covid yet. A gentle reminder that he may bring back compulsory face masks, advising people to work from home, as well as introduce vaccine passports in October should cases continue to rise. Medical experts continue to stress the need for us all to prepare for flu season with rumours of a half term lock down continuing to circulate in the press. This may play a key role is preventing the pound from getting over those previous 1.41/42 highs we saw in June for GBPUSD and 1.18 for GBPEUR in early August.

Have a great day.

Josh Saunders, Senior Relationship Manager.

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