GBP/CAD turned bullish on Tuesday and has recovered the losses incurred on Thursday and Friday. The pair is now trading at 1.7050, up 0.46% as of 11:25, after touching a daily high at 1.7063.
The sterling started to accelerate after the UK’s Office for National Statistics (ONS) said that job growth in Britain was the strongest in more than a year in the three months to November. Thus, the case for an interest rate cut by the central bank next week has faded a bit, though the Bank of England (BoE) will likely ease the policy in the first half of the year.
At the end of last year, two out of nine BoE policymakers surprisingly voted on two occasions to cut the rate, citing weakness in the labor market. Earlier this month, three other members of the BoE’s Monetary Policy Committee (MPC) joined their colleagues, including Mark Carney, saying that more stimulus might be required to support the economy.
The ONS data showed that the number of employed increased by 208,000 to 32.90 million, the biggest growth since the three months to January last year. Analysts polled by Reuters expected an increase of 110,000. The number of those unemployed declined by 7,000 to 1.31 million, with the unemployment rate keeping at 3.8%, the lowest level since 1975.
Interestingly, Thomas Pugh of Capital Economics said that the central bank was giving more importance to the labor market when assessing the state of the economy. He added:
“As such, the rebound in employment and slightly softer pay growth will give the MPC another reason not to cut rates from 0.75% to 0.50% at their next meeting.”
According to the ONS, the growth of total earnings, including bonuses, accelerated by 3.2%, the same rate as in the three months to October, which was the slowest since September 2018. Nevertheless, this was better than analysts’ expectation of a 3.1% increase. Without bonuses, pay growth slowed to 3.4%, in line with expectations.
David Freeman of ONS said:
“While pay growth has eased since last summer, with inflation remaining subdued, earnings are continuing to increase in real terms.”