The pound rallied to a two-month high against the dollar (GBPUSD=X) on Tuesday morning, gaining 0.3% to $1.3638, as data showed continued weakness in the UK jobs market.
Data released by the Office for National Statistics (ONS) on Tuesday showed that annual wage growth excluding bonuses was 4.8% in May to July, down slightly from 5% in the previous three months.
The data also showed falls in the number of payrolled employees and job vacancies, while the rate of unemployment came in at 4.7% in May to July, which the ONS said was up from the latest quarter and above estimates of a year ago.
The figures come ahead of the latest UK inflation reading, which the ONS is due to release on Wednesday. Both sets of data are closely watched by the Bank of England, which is set to announce its latest interest rate decision on Thursday and is expected to keep rates on hold at 4%.
Read more: Stocks slide as jobs report leaves Bank of England on track for interest rate hold
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: “Signs of cooling are emerging in the UK labour market, but wage growth remains stubbornly high, still well above levels consistent with the Bank of England’s inflation target.
“The slight dip in pay growth and falling payrolls suggest momentum is easing, yet services inflation remains sticky, keeping rate cut hopes firmly on ice. With UK rates likely on hold as we move into 2026, markets may need to recalibrate expectations around the timing and pace of policy easing.”
A weaker dollar also supported the pound. The US dollar index (DX-Y.NYB), which tracks the greenback against a basket of six currencies, fell 0.2% to 97.08.
In other currency moves, the pound was little changed against the euro (GBPEUR=X), trading at €1.1557 at the time of writing.
Gold prices hit fresh highs on Tuesday morning, boosted by a weaker dollar and expectations that the US Federal Reserve will announce a rate cut on Wednesday.
Gold futures (GC=F) rose 0.3% to $3,728.30 per ounce at the time of writing, while spot gold gained 0.2% at $3,687.86 per ounce.
A softer dollar typically pushes gold prices higher, as the precious metal is typically traded in the greenback, so weakness in the US currency makes it more affordable for overseas buyers.
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The gold price also tends to rise when interest rates fall, as this reduces the opportunity cost of holding the precious metal, as a non-yielding asset.
Neil Wilson, UK investor strategist at Saxo Markets, said that “assuming the Fed does cut tomorrow, I'd still anticipate the Fed saying that the ‘extent and timing' of further policy adjustments will be dependent on incoming data, and not on a preset course. The market will choose how to take that.
