Sterling remained steady in early trading as employment data released this morning showed British employers added 241,000 to their payrolls last month and the unemployment rate was 4.6% for the second quarter in line with expectations. Tuesday’s data shows a continued recovery in the jobs market as the government phases out its furlough support scheme which will finish at the end of this month. Brexit headlines remain in the news after Brexit minister David Frost threatened that the UK may unilaterally suspend the Northern Ireland protocol unless the EU move their stance in negotiations.
ECB governing Council member Francois Villeroy de Galhau, in an interview with France 2 TV, reiterated that the recent spike in inflation is temporary. Villeroy further added that the ECB is keeping a careful watch for a possible further rise in inflationary pressure. These comments reinforced those by fellow council member Isabel Schnabel, who said on Monday that “inflation will noticeably decrease as soon as next year”.
The dollar was little changed against other major currencies on Tuesday as traders looked ahead to August’s U.S. inflation data due for release this afternoon for clues on the timing of policy tightening by the Federal Reserve Bank. Consensus opinion is that annual inflation will ease slightly to 4.2% last month from 4.3% in July. Federal Reserve chairman Jerome Powell has insisted since March that inflation above these abnormal levels will be short-lived.