The British pound hit a 2.5 month intraday low against the US dollar following the release of the UK employment report and the Bank of England’s Quarterly Inflation report.
For the third month in a row, the number of people claiming unemployment benefits has increased which is a reflection of the softer labor market. Interestingly enough wages actually rose by 4.0 percent, the highest level since November. The surprise came primarily from bonuses because earnings growth excluding bonuses remained at 3.8 percent. According to the RICS, the house price balance fell to the weakest level on record as prices decline across the country. These numbers shifted the market’s focus away from the BoE’s concern about inflation and onto their prospects for growth. Even though inflation is expected to remain well above their 2 percent target for the remainder of the year, the Bank of England revised down their GDP forecasts for next year from 1.6 percent to 1 percent. This is a huge alteration and reflects their degree of pessimism.