British Pound Slips Again

• Pound Sterling skids below 1.2500 as the UK Office for National Statistics reported a weaker-than-anticipated labor market report for July.
• UK employers shed 207K jobs in the three months to July, more than the 185K decline forecasted by markets.  In the three months to June, the labor market lost 66K payrolls.
• The Unemployment Rate for the quarter ending to July rose to 4.3% as anticipated by market participants from the prior reading of 4.2%.
• In August, the Claimant Count Change increased by a mild  900. Investors anticipated the number of people claiming jobless benefits to increase by 17.1K against July’s reading of 29K. Lower claims indicate that labor demand held up.
• The economic indicator that keeps pressure on Bank of England policymakers is the strong wage growth.
• Average Earnings excluding bonuses in the three months to July landed at 7.8%, in line with estimates and the former release. Wage growth data including bonuses rose to 8.5% against projections and the former release of 8.2%.
• Strong wage growth might keep the consumer spending momentum at a high pace as households receive higher disposable income. This will keep inflationary pressures sticky, a problem for BoE policymakers.
• BoE Deputy Governor appointee, Sarah Breeden, said on Tuesday, “I agree with the MPC that the risks to inflation around the August forecast are to the upside.”
• July’s labor market report is going to accelerate uncertainty about September’s monetary policy meeting. The labor market seems to be weakening sharply but wage growth remains persistent, which would leave space for further policy-tightening by the central bank.
• The BoE is widely expected to raise interest rates on September 21 by 25 basis points (bps) to 5.50% while investors will keenly watch guidance for the rest of the year.
• Last week, BoE policymaker Swati Dhingra said that current interest rates are “sufficiently restrictive” and further policy tightening could hurt the economy.
• After labor market data, investors will focus on monthly GDP and factory activity data for July, which will be published on Wednesday at 06:00 GMT.
• The market sentiment remains quiet as investors await the United States Consumer Price Index (CPI) data for August, which will be published on Wednesday at 12:30 GMT.
• The US Dollar Index (DXY) finds feet after a sell-off from the six-month high of 105.10 on renewed fears of a global slowdown.
• A slowdown in the property sector and huge debt in China is raising doubts over its economic outlook. According to a Reuters poll, the Chinese economy is expected to grow 5.0% this year, lower than the 5.5% forecast in a July survey. For 2024 and 2025, growth is forecast at 4.5% and 4.3%, respectively.
• A power-pack action is anticipated in the USD Index after the release of the inflation data. According to estimates, headline inflation is expected to grow at a higher pace of 0.5% in August on month against the 0.2% pace recorded for July.  Core CPI is seen steady at 0.2%. The reacceleration in headline inflation is driven by a strong rebound in gasoline prices.
• An upside surprise in inflation would elevate the chances of one more interest rate hike by the Federal Reserve (Fed) in the remainder of the year.