European session review: GBP declines despite strong UK’s employment statistics

GBP fell against most of its major counterparts in the European session on Tuesday as investors looked past strong UK’s employment data, taking a cautious stance ahead of the start of the U.S Federal Reserve’s policy meeting later today.

The Office for National Statistics (ONS) reported the number of people in work in Britain rose by 113,000 to 32.49 million in three months to April, missing market forecasts of a 150,000 increase. The quarterly advance in employment was mainly driven by an increase in the number of full-time employees. The employment rate stood at 75.2 percent, 0.2 percentage points higher than in the November-January period, but 1.4 percentage points lower than before the pandemic. At the same time, the unemployment rate went down 0.3 percentage points to 4.7 percent in the three months to April, the lowest since the June-August 2020 period. The reading was in line with economists' expectations. Average weekly earnings in the three months to April climbed by 5.6 percent y-o-y, recording the biggest rise since March 2007. The ONS noted that although there were some signs of employers offering sign-on bonuses to attract staff, most of the increase reflected base effects and other distortions.

Meanwhile, the ONS’s early estimates for May revealed that the number of the payrolled employees increased 197,000 in May to 28.5 million, recording its biggest one-month gain since records began in July 2014. The claimant count dropped 92,600 from the previous month. This represented the biggest decline in jobless claims since November of 1996.

Market participants also shrugged off the British prime minister (PM) Boris Johnson’s announcement that the new reopening target date could be shifted forward if enough progress is made. On Monday, the UK’s government delayed its reopening plans from June 21 to July 19.