LONDON: Sterling rose against the dollar on Tuesday as strong jobs data supported the prospect of a Bank of England rate hike, while optimism around talks between Russia and Ukraine weighed on the US dollar safe-haven demand.
Britain’s unemployment rate fell more than expected to 3.9% in the three months to January, official figures showed, while vacancies hit a record high in the three months to February.
Sterling rose 0.5% against a weakening dollar to $1.3066 by 1535 GMT, after touching $1.3000 in Asian trading, its lowest level versus the dollar since November 2020.
“This morning’s UK jobs report...continued to signal tightness in the labour market and accelerating wage-growth dynamics, which support the prospect of another hike by the Bank of England on Thursday,” said Francesco Pesole, FX Strategist at ING.
Money markets are fully pricing in a 25 basis points BoE interest rate hike on Thursday.
The dollar was overall weak against peers as oil prices fell on indications of COVID-crimped economic growth in China and ongoing talks to halt the Russia-Ukraine conflict hit safe-haven demand.
Versus a strengthening euro, sterling rose 0.2% to 83.99 pence after falling to a five-week low in early London trading.
Analysts agree European currencies remain mostly driven by sentiment around the Russia-Ukraine war, with the euro set to benefit the most from a potential resolution of the conflict.
“The recent optimism can help GBP/USD avert a break below the key $1.3000 support but will likely continue to put upward pressure on EUR/GBP, given the euro’s higher beta to the conflict,” Pesole said.
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