Pound drops 0.4% against dollar

Figures released by the Office for National Statistics (ONS) on Tuesday showed that the UK’s rate of unemployment hit 5% in July to September, its highest level since February 2021

The pound dropped 0.4% against the dollar on Tuesday morning, trading at $1.3124, after data showed a continued weakening of the UK jobs market.

Figures released by the Office for National Statistics (ONS) on Tuesday showed that the UK’s rate of unemployment hit 5% in July to September, its highest level since February 2021.

In addition, the data also showed a decline in the number of payrolled employees and slowing wage growth.

Rob Morgan, chief investment analyst at Charles Stanley, said: The UK employment market is now weakening more markedly, reflecting anaemic economic growth, rising employment costs, and business uncertainty.

He said that the upcoming autumn budget, which chancellor Rachel Reeves is due to deliver on 26 November, could offer a modicum of certainty to employers and the opportunity to fully scrutinise the lay of the land.

Yet the elephant in the room is the rising burden of tax and legislation around employment which seems to run counter to the objective of a vibrant and flexible jobs market that could help restore economic momentum, Morgan said.

He added that continued weakness in the jobs market adds weight to the argument that the economy is slowing to a significant extent and that interest rates should come sooner rather than later.

As a result, Morgan said that unless there is a surprise increase in inflation, or a curveball announcement in the budget, then a December interest rate cut by the Bank of England looks fully in play at this point.

The pound was also 0.4% lower against the euro on Tuesday, trading at €1.1352.