Pound stumbles following underwhelming UK jobs report

The pound was subdued on Tuesday as GBP investors were left disappointed by the UK’s latest employment figures.

Sterling remains on the back foot so far this morning, with GBP/EUR ticking down to €1.1474 and GBP/USD slipping to $1.2458. GBP/CAD and GBP/AUD are subdued at CA$1.6809 and AU$1.8737, respectively, while GBP/NZD retreats to NZ$1.9946.

A speech by Bank of England (BoE) Governor Andrew Bailey will be in focus today. Will a dovish outlook pull GBP exchange rates lower?

What’s been happening?

The pound weakened through yesterday’s trading session after the publication of the UK’s latest jobs report.

These reported a surprise rise in unemployment in March, while wage growth also accelerated at a slower-than-expected pace.

Signs of slack in the UK’s labour market further undermined Bank of England rate hike bets and sapped Sterling sentiment.

Meanwhile, trade in the euro was mixed on Tuesday after Germany’s latest ZEW economic sentiment index fell to a five-month low, amid warnings the Eurozone’s largest economy is facing a mild recession.

At the same time, the US dollar strengthened yesterday, with its initial gains linked to a souring of market sentiment after the latest US retail sales print fell short of expectations.

These gains were then reinforced by comments from Federal Reserve policymaker Loretta Mester, in which she suggested it is too soon to talk about pausing the bank’s hiking cycle.

What’s coming up?

The highlight of today’s session is likely to be a speech by BoE Governor Andrew Bailey.

GBP investors will be looking to Bailey to shed more light on the BoE’s plans for monetary policy.

If Bailey repeats his claim that inflation will fall ‘rapidly’ from April, it’s likely to further undermine BoE rate hike bets. Which in turn could pull the pound lower.

In the meantime, the euro could see some movement this morning if the Eurozone’s finalised inflation figures for April deviate from the preliminary print. An upwards revision potentially helping to lift EUR exchange rates.

Also of note to EUR investors will be a speech from European Central Bank (ECB) Vice President Luis de Guindos.

Meanwhile, in the absence of any notable USD data, movement in the US dollar may be driven by market risk dynamics. Will a downbeat mood provide support to the safe-haven currency?