Pound slips as dollar steadies after U.S. jobs data

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Pound slips as dollar steadies

Highlights

Pound falls 0.1% to $1.3338 as dollar steadies after weaker U.S. payrolls data and markets see 70% chance of only one BoE rate hike in 2024.
UK government bond yields drop 12 basis points to 4.79% since June 22, but have risen from June 24 lows as Ed Miliband's finance minister odds increase to 55%.
UK company pricing expectations rise to 4.1% for the year ahead in June, highest since early 2024, indicating continued energy price impact.

Currency moves and rate expectations

As reported by Reuters, the pound is down 0.1% at $1.3338 and is steady against the euro at 0.8055 pounds as the dollar stabilises after weaker-than-expected U.S. payrolls data for June, as well as softer revisions for May and April.

The dollar fell broadly last week after the U.S. employment report led investors to scale back bets that the Federal Reserve could raise rates as soon as this month. Sterling gains 1.1% against the dollar last week, marking its strongest weekly performance in three months.

Lower oil prices, back toward $70 a barrel, also reduce pressure on central banks including the Bank of England to raise borrowing costs. Markets now attach a 70% chance of only one rate rise this year, compared with expectations a couple of weeks ago for at least one increase and a strong chance of a second.

BoE Governor Andrew Bailey says the central bank is not in a position to consider cutting interest rates. A BoE survey published on Friday shows UK companies expect their prices to rise 4.1% in the year ahead in the three months to June, up from 4.0% in May and the highest since early 2024, suggesting the energy price shock is still influencing corporate pricing plans.

Political uncertainty weighs on UK assets

Investors are also watching the contest to replace Keir Starmer as prime minister, with frontrunner Andy Burnham yet to name a finance minister. Market concerns centre on who takes the role and what that could mean for Britain's strained public finances.

Online betting platform Polymarket assigns a 55% chance to former energy minister Ed Miliband, who is seen as more left-leaning and supportive of more expansive fiscal policy. David Stritch, currency analyst at Caxton FX, says Burnham appears likely to take the prime minister's post around the 20th of this month, but the choice of chancellor remains a key question for markets.

Burnham says he has not yet decided whom he would appoint. On June 22, when Starmer announced he would step down, Polymarket traders gave former health secretary Wes Streeting a 73% chance of becoming finance minister, while Miliband stood at 10%.

Since then, UK government bond yields have fallen 12 basis points to 4.79%, though they have edged up from a three-month low of 4.676% reached on June 24 as Miliband's odds have increased.

Our earlier article on Andy Burnham’s devolution and growth agenda looked at how Britain’s prolonged slowdown is intensifying scrutiny of Labour’s economic priorities as Keir Starmer prepares to step down. We noted that Burnham is being pushed to set out a clearer pro-growth strategy, with critics warning that focusing on “good” and regionally spread growth—and potentially dispersing innovation hubs—could weigh on productivity and investment.

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