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GBP/USD tumbles below $1.20 on weak jobs data and Brexit uncertainty

currency-newsGBP/USD tumbles below $1.20 on weak jobs data and Brexit uncertainty
The pound fell sharply on Tuesday, undermined by a lacklustre UK jobs report and fresh Brexit jitters.

Sterling is mostly trading in a narrow range so far this morning, while GBP/EUR is sliding to €1.1467, GBP/USD is flat at $1.2028. GBP/CAD is buoyed at C$1.5596, while GBP/AUD and GBP/NZD are holding steady at AU$1.7408 and NZ$1.9321, respectively.

In the spotlight today will be the Federal Reserve’s latest interest rate decision. Will an aggressive hike from the bank turbocharge the US dollar?


What’s been happening?

The pound retreated against the majority of its peers yesterday, on the back of a mixed UK jobs report.

An unexpected rise in unemployment, coupled with another drop in real wages reignited concerns over the UK’s economic trajectory as well as denting Bank of England (BoE) rate hike bets.

On top of this GBP investors were unnerved by renewed Brexit uncertainty. The publication of the UK government’s bill aimed at unilaterally changing the Northern Ireland protocol stoked fears of a UK-EU trade war.

The euro, meanwhile, rallied on the back of comments from European Central Bank (ECB) policymaker Klaas Knot, in which he suggested the bank is likely to pursue a 50bps interest rate hike in September.

After an initial dip, the US dollar resumed its rally on Tuesday amid hawkish expectations ahead of the Fed’s interest rate decision today.


What’s coming up?

Centre stage today will undoubtedly be the Federal Reserve’s latest interest rate decision.

If the bank opts to raise interest rates by 75 basis points we might see the US dollar surge to new multi-year highs.

Alternatively, a 50bps hike could see USD exchange rates plunge, reversing a large portion of the gains seen since Friday’s US inflation print.

In the meantime, the publication of the Eurozone’s latest industrial production figures may offer some direction to the euro this morning. Will a rebound in production growth in April help to buoy the single currency?
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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