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Pound hits two-week highs on strong jobs data

currency-newsPound hits two-week highs on strong jobs data
The pound surged higher at the start of yesterday’s session, hitting two-week highs against the US dollar and the euro, after the UK’s latest labour market report surprised to the upside.

This morning, the pound is heading lower, with GBP/EUR falling to €1.1785 and GBP/USD sliding to $1.2394. GBP/CAD has dropped to C$1.5908, while GBP/AUD and GBP/NZD have plunged to AU$1.7684 and NZ$1.9501, respectively.

Looking ahead, GBP investors will be focusing on the UK’s latest CPI. Inflation jumped to 9% in April, further fuelling worries about the country’s cost-of-living crisis.
 

What’s been happening?

Yesterday, Sterling shot higher following some surprisingly upbeat UK jobs data. The UK unemployment rate unexpectedly fell to a 48-year low while average earnings (including bonuses) rose by 7%, alleviating cost-of-living concerns somewhat.

Meanwhile, the euro also enjoyed some upbeat data. In particular, eurozone GDP growth beat forecasts for the first quarter of 2022, cheering EUR investors.

As a result, the single currency regained its losses against the pound and firmed against its other peers.
The US dollar, meanwhile, had a disappointing session. The strong European data further fuelled a risk-on market mood, sapping demand for the safe-haven ‘Greenback’.

A robust US retail sales print gave USD a modest lift, although it may have also fed into the bullish tone among investors.
 

What’s coming up?

Today’s focus for the pound is the UK CPI. Although higher inflation could prompt the Bank of England (BoE) to further hike rates, which would support the pound, economists are worried that soaring prices will lead to a recession.

As a result, we may see mixed movement in GBP as markets digest the latest reading.

The finalised eurozone inflation rate may also trigger some movement, particularly if it surprises markets. Amid speculation around when the European Central Bank (ECB) might start hiking interest rates, EUR investors will be eagerly awaiting the CPI.

Notable American data is thin on the ground today, so the US dollar could trade primarily on market risk appetite.
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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