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Sterling soars on bumper UK jobs data

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·2-min read
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The pound strengthened against a week dollar and strong UK employment market data. Photo: Getty
The pound strengthened against a week dollar and strong UK employment market data. Photo: Getty

The pound reached its highest levels of the year on Tuesday as optimism gained on a strong employment report and the next stage of the UK's roadmap to reopening took hold. 

Sterling was trading 0.6% higher against the dollar (GBPUSD=X), reaching $1.42 by 10.15am in London. It also headed slightly higher against the euro (GBPEUR=X).

Jobs data from the Office for National Statistics (ONS) from the UK showed the first gain in employment since the pandemic began with 84,000 gaining jobs in April as the economy emerged from the latest series of lockdowns.

The ONS said that the national payroll expanded by 97,000 between March and April. The increase was the biggest monthly jump in jobs in nearly six years according to Jack Kennedy, a UK economist at Indeed.

The rapid increase in hiring came as non-essential retail, outdoor venues, and leisure and care facilities were allowed to reopen from 12 April. Restrictions were eased again this week, suggesting the hiring spree could continue.

Cable climbed off the back of strong jobs data and a weaker dollar. Chart: Yahoo Finance UK
Cable climbed off the back of strong jobs data and a weaker dollar. Chart: Yahoo Finance UK

"The labour market is very much a two-tier story at the moment; jobs either being snapped up by high-skilled workers furloughed or made redundant through the pandemic or low-skilled workers remaining unable to gain new employment," said Jeremy Thomson-Cook, chief economist at international business payments specialist Equals Money.

"For now, the pound is enjoying the stronger news and may be able to continue its growth if tomorrow’s inflation number is shown to be strong. We also have three Bank of England speakers today with Governor Bailey and Members Broadbent and Ramsden giving evidence in the Lords."

Read more: UK jobs market 'turns corner' as 100,000 hired ahead of reopening

A weaker dollar also helped push the pound higher. 

"The dollar remains on the back foot more generally," said Neil Wilson, chief market analyst for Markets.com, noting that "the combination of weaker USD and lower real rates helped gold continue to advance beyond $1,870 where it is looking at the 50% retracement of the move down since August."

Currency watchers will be watching COVID-19 infection rates in the UK, which have so far been going in the right direction due to a solid vaccine rollout. There has been some concern in recent weeks about the Indian variant of the virus, which has been shown to spread more quickly. 

Watch: What is inflation and why is it important?