The UK’s unemployment rate has fallen to a 43-year low for the month of June, unexpectedly dropping to 4.0% from 4.2% previously. Given that this metric was expected to remain in line with the 4.2% seen in May, it is something of a positive surprise. The wage growth number were a little disappointing however, coming in below consensus forecast at 2.4% but if the volatile bonus component is ignored, then the matched expectations at 2.7%.
Overall the data could be described as mildly positive for the pound, and the currency quickly spiked up to its highest level of the day not long after the release. This seemed to be a bit of a knee jerk reaction to the unemployment figures and the gains have been pared as traders digested the miss in wages.
The pound hit its lowest level against the US dollar last Friday at $1.2732 which represents an almost 12% decline in the last 4 months since the mid-April high. The selling does appear to have maybe been a little overdone with not just sterling weakness accounting for the drop in the pair but also a resurgence in the buck. To put in perspective just how sustained this depreciation has been 13 of the past 17 weeks have seen lower closes for cable and there is now clearly some suggestion that price may have overshot to the downside and could be set to recover going forward.