Sterling holds at $1.30 as jobs data fuels rate hike bets

© Reuters. FILE PHOTO: British Pound Sterling banknotes are seen in a box at the Money Service Austria company’s headquarters in Vienna, Austria, November 16, 2017.REUTERS/Leonhard Foeger

By Joice Alves

LONDON (Reuters) – Sterling rose against the dollar on Tuesday as strong jobs data supported the prospect of a Bank of England rate hike, while optimism around talks between Russia and Ukraine weighed on the U.S. dollar safe-haven demand.

Britain’s unemployment rate fell more than expected to 3.9% in the three months to January, official figures showed, while vacancies hit a record high in the three months to February.

Sterling rose 0.5% against a weakening dollar to $1.3066 by 1535 GMT, after touching $1.3000 in Asian trading, its lowest level versus the dollar since November 2020.

“This morning’s UK jobs report…continued to signal tightness in the labour market and accelerating wage-growth dynamics, which support the prospect of another hike by the Bank of England on Thursday,” said Francesco Pesole, FX Strategist at ING.

Money markets are fully pricing in a 25 basis points BoE interest rate hike on Thursday. [IRPR]

The dollar was overall weak against peers as oil prices fell on indications of COVID-crimped economic growth in China and ongoing talks to halt the Russia-Ukraine conflict hit safe-haven demand.

Versus a strengthening euro, sterling rose 0.2% to 83.99 pence after falling to a five-week low in early London trading.

Analysts agree European currencies remain mostly driven by sentiment around the Russia-Ukraine war, with the euro set to benefit the most from a potential resolution of the conflict.

“The recent optimism can help GBP/USD avert a break below the key $1.3000 support but will likely continue to put upward pressure on EUR/GBP, given the euro’s higher beta to the conflict,” Pesole said.