Data published by the Office for National Statistics (ONS) showed a rise in the UK unemployment rate from 3.8 percent to 3.9 percent in June, with the level of joblessness edging away from a 44-year low for the first time since February. However, GBP investors were more focused on accompanying earnings figures which revealed surging wage growth (excluding bonuses) from 3.6 percent to 3.9 percent, the largest increase since 2008. This could encourage consumer spending in the UK which, in turn, could potentially help to prop up the UK economy.
However, GBP/USD gains were limited as the US dollar also found support on Tuesday morning, with risk aversion increasing the appeal of the safe-haven currency.
Rising geopolitical tensions, unrest in Hong Kong and a rout on the Argentine Peso are all contributing to the risk-off mood.
Coming up later this afternoon, we may see the publication of the latest US CPI figures exerting some pressure on the GBP/USD exchange rate.
Economists forecast US inflation ticked higher in July, potentially lending some support to the US dollar by decreasing the odds of another Federal Reserve rate cut in September.
GBP investors will turn to the publication of the UK’s own CPI figures on Wednesday. The inflation report may see the pound retreat if consumer price pressures slowed in line with expectations last month.
Slowing inflation would be another reason for the Bank of England (BoE) to consider easing monetary policy later in the year.