The pound is losing ground as investors continue to focus on riskier assets amid hopes that a COVID vaccine would put an end to the pandemic. US biotech firm Moderna reported earlier this week that it had successfully trialed its vaccine against the new coronavirus, and is now moving to the next phase to test it on 30,000 people.
However, the number of COVID cases continues to surge. India reported another record of daily new cases on Wednesday, with over 32,000 infections. Many regions and cities are reimposing strict lockdown measures, which hits the fragile economic recovery that was observed at the beginning of the month.
Pound Ignores Strong Labour Market Data
Nevertheless, the pound is correcting despite upbeat labour market data. The Office for National Statistics reported a few hours ago that the pace of decline in the UK’s labour market slowed last month. Thus, the number of workers declined by 649,000 in the three months to June, with most of the decline registered at the start of the outbreak.
The unemployment level surprisingly remained unchanged at 3.9% in the three months to May, while analysts expected an increase to 4.2%. Despite the seemingly limited damage to the labour market, the ONS figures do not include furloughed staff.
Another sign of concern is that the number of vacancies dropped in the three months to June to the lowest level on record, at 333,000, which is 23% lower than the previous low in 2009.
Last week, finance minister Rishi Sunak unveiled the 30 billion-pound program to address an expected increase in unemployment. The scheme includes the payment of bonuses businesses that welcome back furloughed workers.
The pound versus rupee would have probably revisited the 95.000 level, but the fragile recovery of Britain’s gross domestic product (GDP) has disappointed investors. Yesterday, the ONS reported that the UK economy gained only 1.8% in May, after a 20% contraction in April. Analysts expected a 5% increase for May.