The Pound Continues to Lose Ground
Mixed labor market data released on Tuesday failed to support the pound, which is rapidly losing ground. The unemployment rate in the UK fell to 5%, but average wages increased by 4.8%, although a more significant increase was expected. The data refers to January, when the restrictions on business were more serious, so we can expect a strengthening of the indicators in the next month. At the same time, market participants are already assessing the new restrictions, which will undoubtedly cause a second drop in all economic indicators, including in the UK.
Meanwhile, in the US, the short-term outlook continues to improve. Fed Chairman Jerome Powell told the House Financial Services Committee that the economic recovery is far from over, although the situation is now much improved. Indicators of economic activity and employment have recently increased significantly. At the same time, the unemployment rate is 6.2% and implies an incomplete use of resources in the labor market, since the share of the economically active population remains significantly lower than pre-crisis indicators. Powell has traditionally noted that the Fed will continue to support the economy for as long as necessary, while using all available tools. As a result of the speech, demand for the US currency increased, especially against risky assets.