UK Unemployment Rate Drops to 4.2% in June Testing BoE Rate Cut Bets

Average earnings (incl. bonus) increased by 4.5% from April to June 2024, compared to a 5.7% rise from March to May 2024.
Job vacancies fell by 26k in the quarter but remained above pre-pandemic levels.

Bank of England Monetary Policy Implications

The unexpected drop in the UK unemployment rate could impact investor bets on a Q4 2024 Bank of England rate cut.

Tighter labor market conditions could support wage growth, boosting disposable income, and consumer spending. Higher consumer spending may fuel demand-driven inflation, pressuring the BoE to leave rates higher for longer.

The fall in the unemployment rate overshadowed the wage growth trends and their influence on the BoE rate path.

GBP/USD Response to the UK Labor Market Data

Before the June UK labor market report, the GBP/USD fell to a low of $1.27567 before climbing to a high of $1.27818.

However, following the UK Labor Market Overview Report, the GBP/USD surged from $1.27799 to a post-report high of $1.28048.

On Tuesday, August 13, the GBP/USD was up 0.37% to $1.28043.