LONDON: The pound rose on Tuesday as traders bet some of the Bank of England’s concerns about the risks of raising interest rates could soften, after data showed British employers hired more people in October after a job-protecting furlough scheme ended.
Fears of a slowdown in the job market, following the end of the furlough scheme on Sept. 30, prompted the BoE to surprise the market and keep rates on hold at its latest meeting, when sterling had its deepest fall versus the dollar in 14 months.
Sterling rose 0.5% versus the euro after data showed the number of staff on businesses’ payrolls in Britain rose by 160,000 in October versus the month before to 29.3 million, 0.8% higher than in February 2020 before the pandemic hit, based on data from tax authorities.
“Tuesday’s robust employment data may now renew confidence in an imminent hike by the Bank of England,” said Joe Tuckey, FX analyst at Argentex. There is “cautious optimism that sterling may finally receive some much-needed uplift,” he added.
At 1545 GMT, the pound was 0.3% higher against the single currency at 84.50 pence.
Versus a strengthening dollar, the pound was up 0.1% at $1.3426, erasing some of its earlier gains after data showed US retail sales increased more than expected in October.
The pound has recovered some ground this week after it dropped on Friday to its lowest against the dollar in 11 months.
Also supporting sterling, BoE Governor Andrew Bailey said that his vote to keep interest rates on hold earlier this month had been a very close call. The lack of official data about what had happened to workers who were still on furlough when the scheme ended had made him want to wait.
The BoE could be the first major central bank to raise interest rates, but whether that initial increase comes as soon as next month or early next year has divided economists polled by Reuters.
In the meantime, capping sterling gains, there are worries that disagreements between Britain and the European Union over Northern Ireland could trigger major trade disruption, hitting the British economy, which is lagging that of other rich nations.
Comments
Comments are closed.