What’s Going On Here?With new reports suggesting Brexit negotiations won’t extend much further, the British pound fell on Tuesday – but at least fresh data showed that, in the three months to October, UK unemployment reached its lowest level since 1975. What Does This Mean?The UK unemployment rate between August and October dropped to 3.8%, suggesting the continued decline in British manufacturing activity hasn’t yet led to job losses (tweet this). Or if it has, they might’ve been more than offset by new jobs in the services industry, which represents 80% of the UK economy and is shrinking more slowly than its blue-collar counterpart.
Workers’ average wages between July and September, meanwhile, were lower than economists predicted, even if they are 3.2% higher than a year ago. Still, they are rising faster than product prices, so all else being equal, Brits should have a little extra spending money after each paycheck. Why Should I Care?For markets: Breaking the pound.
Strong employment data is typically good for investors: it points to a stronger UK economy and may encourage them to buy the British pound. But their focus on Tuesday was, after a very brief respite, back on Brexit. Reports the UK might yet leave the European Union in a year’s time without a trade agreement risk increasing businesses’ trading costs, in turn lowering their profits. And investors – perhaps hoping to escape renewed uncertainty – sold off the pound, which fell 1% and neared its level from before last week’s election.
For you personally: Penny wise, pound foolish.
US investors who might’ve benefited from owning America’s stocks and avoiding Britain’s might now begin to reassess the impact of currencies on their investments. Some analysts expect the US dollar to weaken and the pound to strengthen next year – the latter thanks to the postponed business investment likely to arrive once Brexit is brexecuted. International investors who agree might see the pound as an attractive investment, and UK investors might invest domestically to avoid losing out from a rising currency. | 