Sterling crept back over $1.30 following the news from the ONS that 8600 less jobless claims were made in July versus forecasts of a 9500 increase in unemployment.
The new hires brought the employment rate to 74.5%, the highest since comparable records began in 1971. The unemployment rate remained at a record low of 4.9%.
“Brexit-related uncertainty was expected to have hit employment, and consensus forecasts were for a 9500 rise in the number of people claiming out-of-work benefits in July,” said Ben Brettell, senior economist at Hargreaves Lansdown. "In fact the figure fell by 8600 in a clear indication that the labour market held up well in the aftermath of the referendum.”
“The post-referendum reality will gradually become clear over the next few months,” Bretell continued. “Forward-looking surveys, for example PMI, have indicated that Brexit has delivered a confidence shock. However, it’s still early days in terms of hard data.”
“An unexpected fall in UK claimants has caught forex markets off-guard, with sterling rallying across the board,” said IG market analyst Joshua Mahony. “With the deterioration in PMI readings following the June vote, it was widely expected that hiring would suffer, driving up unemployment and lowering claimants. However, today’s data provides evidence that perhaps firms are not so quick to act on the expectation that Brexit will drive a slowdown in the UK economy.”
“With average earnings rising 2.4% on the year in June, unemployment remaining steady and claimant numbers dropping, any feeling within the Bank of England that they need to take further action in the coming months may be allayed,” Mahony added. “Perhaps the further rate cut Mark Carney alluded to may take somewhat longer to come to fruition.”