Pound hits weakest level against dollar in 3 weeks

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LONDON • Britain’s pound hits its lowest level in three weeks against the dollar on Tuesday, suffering its worst day in a month as weakening risk sentiment weighed on global stock markets, hitting risk-correlated currencies including the commodity-linked Australian, Canadian and Kiwi dollars.

Global stock markets were in the red for a second day running as an unexpectedly weak set of Chinese economic data along with unrest in Afghanistan and other factors weighed on appetite for riskier assets.

The pound hit its weakest level since July 26, falling as much as 0.7 per cent on the day to US$1.3744. The 0.7 per cent drop was its biggest daily loss since June 18. Against the euro it hit a two-week low of 85.35 pence.

The market mostly overlooked positive jobs data. As Britain’s economy extended its recovery, payrolls rose by 182,000 in July to 28.9 million, data showed — 201,000 shy of the level seen before the COVID-19 pandemic hit in March 2020.

The Office for National Statistics also said the headline unemployment rate fell to 4.7 per cent in the three months to June, its lowest since the three months to

OVERALL BETTER THAN EXPECTED LABOUR MARKET DATA OUT OF THE U.K

August 2020.

Economists polled by Reuters had mostly expected the unemployment rate to hold at 4.8 per cent.

“The pound continues to struggle despite the overall better than expected labour market data out of the U.K.: the unemployment rate came in a tad lower and the weekly earnings were stronger than expected, while the employment gains continued at a healthy clip in June,” said Valentin Marinov, head of G10 FX research at Credit Agricole.

“The slightly less good news was the fact that the claimant count continued to grow in July with the drop in total jobless claims that we saw in June stagnating in July. The data has offered the pound relatively little support likely because the labour market conditions in the U.K. are expected to soon start deteriorating again after the expiry of the government’s furlough scheme next month.”

On Wednesday, investors will look to U.K. inflation figures, with the market consensus expecting inflation to ease.

That will reduce pressure on the Bank of England to normalize monetary policy any time soon, Marinov said.