The pound fell alongside UK borrowing costs yesterday as a rise in unemployment and slowdown in wage growth added to the likelihood of a summer interest rate cut.
Official figures showed joblessness climbed to 4.6 per cent in the three months to April – the highest level since July 2021.
And more recent data from HM Revenue and Customs suggested the jobs market worsened last month, with payroll numbers shrinking by 109,000.
That was the biggest fall since comparable records began in 2014, excluding the pandemic, and much worse than expected by economists.
The pound fell by a cent against the dollar to less than $1.35, before clawing back some of the losses. It also dipped close to €1.18 against the euro, its lowest level in a month.
Government-borrowing costs fell, with yields on ten-year UK bonds dipping to 4.53 per cent, the lowest since early May.

Jobs crisis: Official figures showed joblessness climbed to 4.6% in the three months to April and more recent data from HMRC suggested that the jobs market worsened further last month
The jobs slump was blamed on Chancellor Rachel Reeves’s decision to raise employer National Insurance Contributions, a policy that is widely regarded as a tax on jobs.
More than a quarter of a million jobs have been lost since her tax-raising Budget in October, which also sharply increased the minimum wage.
Yesterday’s figures showed annual pay growth in the three months to April fell to 5.2 per cent, a bigger drop than expected by economists and down from 5.6 per cent the month before.
Job vacancies fell by 63,000 to 736,000 – below pre-pandemic levels, according to the Office for National Statistics (ONS).
Liz McKeown, ONS director of economic statistics, said: ‘There continues to be weakening in the labour market, with the number of people on payroll falling notably.
‘Feedback from our vacancies survey suggests some firms may be holding back from recruiting workers or replacing people when they move on.’
The grim figures will add to pressure on the Bank of England to cut rates this summer. A cut at the Bank’s Monetary Policy Committee meeting next week would come as a shock.
But traders now see a two in three chance of a quarter-point reduction in August. Bets that there will be a further cut by the end of the year also increased following yesterday’s figures.
Any signs of further jobs weakness could add to rate cut expectations, according to Nick Andrews, senior FX strategist at HSBC. If that happens, the pound ‘will likely struggle’ versus both the dollar and the euro, he added.
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