Sterling Swells as UK Labour Data Lends Support

Sterling gained ground against the dollar and euro following UK labour data that suggested economic stability. Although pay growth cooled, employment rose, pointing to potential interest rate cuts by the Bank of England. Investors await upcoming GDP figures for further insights, and banks are bracing for possible tax hikes.

Sterling gained marginally against the dollar and the euro, bolstered by UK labour data that indicated a resilient British economy.

Data from the past three months revealed a slowdown in pay growth and a surge in employment, which sets the stage for a possible interest rate cut by the Bank of England. While inflation appears to be aligning with the Monetary Policy Committee's 2% target, economic activity remains robust, suggesting a gradual easing of monetary policy.

Investors are closely monitoring Wednesday's GDP figures ahead of the Bank of England's upcoming meeting. Senior economist Sanjay Raja from Deutsche Bank predicts a 0.3% month-on-month economic expansion following June's stagnation, driven by a recovery in retail and leisure services. Meanwhile, banking institutions in Britain are increasing their lobbying efforts against potential tax hikes in the new Labour government's first budget set for next month.

(With inputs from agencies.)