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Pound Rises Against Softer Dollar Amid Mixed UK Economic Signals
The British pound rose against the U.S. dollar on Tuesday, as the greenback consolidated during a quiet trading session. The move saw the GBP/USD pair climb 0.35% to $1.3352, while the euro also edged higher, with EUR/USD up 0.19% at $1.1233.
Dollar Eases Amid Persistent Risks
The pound's advance appeared to be driven by a general softness in the dollar rather than specific UK fundamentals. Analysts at ING noted that while the week began quietly, key market themes remain unresolved, including elevated energy prices and geopolitical tensions.
According to Chris Turner at ING, these factors are preventing a significant correction in bond yields. The firm also identified credit market stress, such as a specific corporate bond from Coreweave trading at a discount, as a potential threat to the dollar's strength. Despite the day's dip, ING expects the DXY dollar index to find support around the 101.50/60 level, with the currency likely to remain relatively supported barring a major downturn in U.S. tech stocks.
UK Labour Market Sends Mixed Signals
Recent data from the UK's Office for National Statistics (ONS) presented a conflicting picture of the country's labour market, offering little clear direction for the Bank of England. While the unemployment rate fell to 4.7% in the three months to August, below the forecast 4.9%, other indicators pointed to a cooling market.
AdKey figures from the ONS report included:
- Job vacancies fell 2.9% to 691,000, the lowest level since 2014, excluding the pandemic period.
- Total pay growth slowed to 3.7%, its weakest pace since late 2020.
- The number of payrolled employees declined by 0.4% year-on-year in August.
Broader Market Context
Elsewhere, the euro found modest support despite widening French debt spreads ahead of a budget vote and a credit rating review by Moody's on Friday. ING analysts described the case for a euro recovery as "weak."
Looking ahead, investors are watching for third-quarter earnings from U.S. tech giants including Tesla, Meta, and IBM on Wednesday. Upcoming U.S. housing and employment data are not expected to be major market movers, according to ING.
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