Investors were caught off guard by the news that the Australian unemployment rate had dropped from 5.3% to 5.0% in September, although AUD exchange rates failed to capitalise on the data.
This morning Sterling is holding steady, with GBP/EUR flat at €1.1358, GBP/USD muted at $1.3550 and GBP/CAD virtually unchanged at C$1.7348, while GBP/AUD and GBP/NZD are holding steady at AU$1.7968 and NZ$1.9525 respectively.
Looking ahead the pound may stumble later today, if UK wage growth slowed as expected in March…
What’s been happening?
The pound ticked higher on Monday, rallying from last week’s heavy losses in the wake of the Bank of England’s (BoE) decision to leave rates on hold.
This appeared to be a more sustained recovery, building on Friday’s gains following suggestions that Sterling may have been oversold in the wake of the BoE meeting.
However the pound struggled to make any headway against the euro yesterday, with the GBP/EUR exchange rate remaining flat as investors appeared cautiously optimistic about the formation of a new coalition government in Italy.
Despite the new government being formed by Italy’s anti-establishment Five Star Movement and the far-right League party, EUR investors welcomed the end to the months of political deadlock which have loomed over the country since the general election.
At the same time the GBP/USD exchange rate saw a notable uptick on Monday as the recent rally in the US dollar began to fade following declining expectations that the Federal Reserve will look to accelerate its monetary tightening this year, which prompted US treasury yields to sag.
What’s coming up?
Investors are bracing for a slide in the pound today as the UK publishes its latest labour report.
While the data is expected to report that the UK’s unemployment rate held at a 42-year low of 4.2% last month, it is the accompanying wage figures that are likely to be the focus for most investors, with wage growth forecast to have slid at the end of the first quarter.
This slowing of wage growth is likely to weigh heavy on the pound as it dampens hopes that a rally in consumer spending could fuel a rebound in the UK’s economic growth in the second quarter.
The euro meanwhile may slip back this morning as Germany’s latest economic sentiment index is forecast to have remained at a five-year low this month.
Finally the US dollar looks set to continue its retreat later this afternoon with the release of the latest US retail figures, with sales growth forecast to have slowed from 0.6% to 0.3% in April.
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)