European session review: GBP depreciates despite better-than-expected UK’s labour market data

GBP fell slightly against most of its major rivals in the European session on Tuesday, as an initial wave of investors’ optimism over upbeat labour market data out of Britain ebbed. 

The official data showed on Tuesday a surprise drop in the UK unemployment rate in the three months to February, adding further signs the UK’s economy is recovering from its worst recession in more than 300 years.

According to the Office for National Statistics (ONS), the UK’s unemployment rate fell to 4.9 percent in the three months to February from 5 percent in three months to January, while economists had forecast the rate to increase to 5.1 percent. The upbeat jobs data were supported by the British government's furlough scheme, which was extended last month until the end of September. 

The ONS also announced that average earnings including bonus increased 4.5 percent y/y in three months to February, slower than the expected gain of 4.8 percent. Meanwhile, excluding bonus, earnings grew 4.4 percent y/y, exceeding economists forecast of a 4.2 percent y/y advance.

It was also reported that the claimant count rate held steady at 7.3 percent in March. The number of people claiming unemployment benefits increased by 10,100 in March, following an 86,600 climb in February.

Market participants now look for UK's manufacturing and services PMI survey data, reports on inflation, retail sales, and consumer confidence, which are to be released later this week, hoping to receive further signs of the British economy’s recovery.