Pound Succumbs to Weaker Jobs Data Hinting at Post-Brexit Risks

  • Lowest jobless rate in a decade is failing to boost earnings
  • Sterling remains worst perfomer among G-10 currencies in 2016

The pound fell against the dollar and erased an advance to a more than two-week high versus the euro as the U.K. jobs market showed signs of cooling in the run-up to the referendum on European Union membership.

Sterling was roughly mid-table versus its Group-of-10 peers after data showed wage growth excluding bonuses slowed in the first quarter, even as unemployment remained at a decade-low.

Coming after data Tuesday showed an unexpected drop in the inflation rate, the employment reports added to signs the U.K. economy isn’t recovering quickly enough for the Bank of England to raise interest rates. They also hinted at the potential risks of the nation voting to quit the world’s largest trading bloc on June 23 -- which have sent sterling lower versus all of its G-10 counterparts this year.

“The fundamental context hasn’t been supportive for the pound in the past few weeks, and will continue in a similar way ahead of the referendum,” said Roberto Cobo Garcia, a strategist at Banco Bilbao Vizcaya Argentaria in Madrid. “We’re negative on sterling in the weeks ahead, especially in cable,” he said, referring to the pound-dollar rate.

The U.K. currency dropped 0.3 percent to $1.4420 as of 11:25 a.m. London time, ending a two-day gain that had pushed it up 0.7 percent. The pound was little changed at 78.16 pence per euro, after earlier touching the strongest level since April 29.

Sterling was stronger earlier after an opinion poll showing the EU “Remain” campaign four percentage points ahead, stoking speculation that a Brexit is becoming less likely.

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