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Pound looks to gain on falling UK unemployment

currency-newsPound looks to gain on falling UK unemployment
After lacking direction through Monday’s session, the pound may experience more significant movement today on the latest UK jobs data.

Sterling is edging higher so far this morning, with GBP/EUR firm at €1.1975 and GBP/USD flat at $1.3643. GBP/CAD is subdued at C$1.7071, while GBP/AUD and GBP/NZD are strengthening at AU$1.8971 and NZ$2.0146, respectively.

Looking ahead, will this morning’s upbeat employment data push GBP higher today?

What’s been happening?

The pound lacked direction during Monday’s session amid a lack of notable UK data releases, and investors appearing to have already priced in a rate hike from the Bank of England (BoE) in February following recent UK economic optimism.

Reports that UK coronavirus case numbers are falling and speculation Covid restrictions will end at the UK government’s next review on 26th January failed to offset the subdued market mood.

Meanwhile, the US dollar made modest gains at the start of the week despite US markets’ closure for a national holiday.

Comments from Federal Reserve policymakers over the weekend that strongly signalled an interest rate hike in March continued to provide USD support.

As the Fed’s blackout begins ahead of its January policy meeting, the final public insight from Fed officials underpinned USD.

Amid a lack of significant Eurozone data releases or drivers of movement, the euro was subdued due to its negative correlation with the US dollar.

What’s coming up?

The latest UK jobs data release this morning looks to be the main focus for GBP investors today.

The UK unemployment rate unexpectedly dropped to 4.1% in the three months to November, down from 4.2%, and nearer to pre-pandemic levels, while average earnings figures met expectations at 4.2%, down from 4.9%.

Slowing wage growth falling below the UK consumer price index could cause investors to adjust bets on Bank of England (BoE) interest rate hikes during 2022, in turn driving movement in the pound.

Meanwhile, Germany’s latest ZEW economic sentiment surveys for January may struggle to support the euro as forecasts point to only a slight increase, with the reading remaining well below the summer’s levels.

The US dollar may experience greater movement today as US markets reopen after closing yesterday.

With few notable US data releases market risk appetite and Federal Reserve rate hike bets will likely remain as the key drivers of US dollar movement.
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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