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Pound exchange rates buoyed as UK unemployment slides to 43-year low

currency-newsPound exchange rates buoyed as UK unemployment slides to 43-year low
Pound exchange rates buoyed as UK unemployment slides to 43-year low

The pound found some stable footing on Tuesday, edging higher against its peers as it was buoyed by the UK’s latest labour report.

Sterling so far appears content to consolidate this morning, with GBP/EUR stable at €1.1222 and GBP/USD trending narrowly at $1.2727. Meanwhile GBP/AUD and GBP/CAD are holding steady at AU$1.7594 and C$1.6639 respectively. Only GBP/NZD shows any real signs of movement this morning at it climbs to NZ$1.9406.

The UK’s latest CPI figures will be in focus today as GBP investors brace for an expected rise in UK inflation.

What’s been happening? 

The pound crept higher on Tuesday as the currency found support from the release of the UK’s latest labour figures.

Data published by the Office for National Statistics (ONS) revealed a surprise drop in UK unemployment in June with the jobless rate falling from 4.2% to 4%, the lowest rate of unemployment since the start of 1975.

The accompanying pay figures proved to be less supportive however, with Sterling’s gain’s being tempered somewhat as wage growth slowed to 2.4% over the same period.

The GBP/EUR exchange rate ticked up by around 0.2% yesterday, with some stronger-than-expected Eurozone GDP figures failing to inspire confidence in the euro.

Instead the single currency appeared to remain under pressure over lingering concerns that Eurozone banks may be overly exposed to the current currency crisis enveloping Turkey.

Meanwhile the GBP/USD exchange rate remained range bound yesterday as the US dollar continued enjoying robust demand, despite a rebound in emerging currencies following Monday’s heavy losses.

What’s coming up?

Looking ahead, the UK’s latest CPI figures could pressure the pound later today as economists forecast a slight uptick in price growth last month.

Analysts expect inflation to rise from 2.4% to 2.5% in July, potentially weakening Sterling sentiment as it signals price growth may be outpacing wage growth once again, leading to a fall in real pay.

Given the Bank of England (BoE) has also indicated that the next rate hike is likely to be some way off, it unlikely investors will welcome the uptick in inflation with open arms.

The US dollar, meanwhile, may also struggle today, following the publication of the latest US retail sales figures, with analysts predicting sales growth will have slowed in July.

Finally the euro may be left on the back foot today as a lull in economic data potentially leaves the focus on the Eurozone’s exposure to Turkey and its current financial woes.
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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