GBP slipped against both the EUR and USD following the UK's unexpected uptick in unemployment, though its decline will likely be tempered by robust wage growth, fostering a cautious stance at the Bank of England (BoE). GBP weakened as the Office for National Statistics revealed a rise in the UK's unemployment rate to 4.2% in February, surpassing market expectations of 4.0%.
Meanwhile, the significant average earnings metric, including bonuses, remained steady at 5.6% in February, exceeding market projections of 5.5%. Excluding bonuses, average earnings saw a slight dip to 6.0% from the previous month's 6.1%, yet still outpaced market forecasts of 5.8%.
Former BoE Monetary Policy Committee member Andrew Sentance suggests that UK regular pay growth continues to exceed levels "well above" the 3-4% range typically associated with 2% inflation. Sentance notes, "Pay growth has only decreased by less than 2 percentage points from its peak of 7.9% last year. There is still a significant distance to cover before wage increases return to a sustainable pace."
The USD may receive another lift as US industrial production data is expected tonight. After a 0.1% rise in February, headline industrial output is projected to climb by 0.4% month-on-month in March. Core manufacturing likely expanded by 0.3% during the month, with an increase also anticipated in vehicle output.
Following a notable decline in February, it's anticipated that utilities will rebound. However, mining activity likely decreased throughout the month, primarily driven by a significant drop in coal production. The USD has attained record highs amid diminishing expectations of Federal Reserve easing – this trend could persist, further bolstering the currency.
