FXStreet notes that GBP is underperforming despite a fairly upbeat UK employment report. Economists at TD Securities think UK jobs data could become an increasingly important driver for sterling in the months ahead. With the UK's furlough scheme on track to begin winding down next month, a wave of potential job losses looms. 

“The unemployment rate itself was relatively unremarkable. That came in exactly in line with consensus expectations at 4.7% in April. The surprise was in the wage data, however, which was quite a bit stronger than expected. The headline came in at 5.6% YoY (mkt 4.9%), while the ex-bonuses measure was 5.6% YoY (mkt 5.3%).”

“Unfortunately it's difficult to disentangle whether there was any pick-up in underlying wage growth there. Anecdotal reports indicate that the hospitality industry has had to raise wages due to labour shortage, but it may take some time to find real evidence for this. Going forward, we'll need to see how this plays out.”

“The UK government stuck to the line that it would begin to wind down its furlough program at the end of this month. Pressure is increasing to extend the current program, however, as some struggling businesses may be forced to lay off workers if it is not. This suggests the UK employment dynamic could become a much more important driver for the pound in the months ahead as a potential cliff-edge of large job losses looms.”