Pound undermined by disappointing UK jobs report

The pound was left mostly rangebound on Tuesday, in response to a lacklustre UK jobs report.

Sterling is off to a positive start so far this morning, with GBP/EUR jumping to €1.1732 and GBP/USD rising to $1.2466. GBP/CAD has climbed to CA$1.7230, while GBP/AUD ticks up to AU$1.9416 and GBP/NZD holds steady at NZ$2.1105.

Coming up, will a stronger-than-expected UK inflation print help to underpin the pound today?

What’s been happening?

The pound faced resistance yesterday, following the publication of the UK’s latest jobs report.

GBP struggled to gain traction as February’s figures reported a larger-than-expected increase in unemployment in addition to a surprise deceleration in wage growth.

The US dollar initially firmed on Tuesday as fears of a wider regional conflict in the Middle East saw investors favour the safe-haven currency.

However, after striking new multi-month highs, USD exchange rates faltered through second half of the European session in response to some profit-taking.

Subsequent comments from Federal Reserve Chair Jerome Powell then revived USD demand later in the evening as he suggested there has been a lack of progress on inflation.

At the same time, the euro drew some modest support from the release of Germany’s latest ZEW indicator, after April’s index reported that morale in the Eurozone’s largest economy climbed to its highest levels since February 2022.

What’s coming up?

Today’s session opened with the publication of the UK’s latest consumer price index.

The CPI figures reported that inflation cooled from 3.4% to 3.2% in March. While this was the slowest rate of price growth since September 2021, it beat forecasts it would slow to 3.1%.

This appears to be lending support to the pound so far this morning as it weakens the case for the Bank of England (BoE) to start cutting interest rates before the summer.

This morning also sees the publication of the Eurozone’s latest inflation print. March’s finalised CPI figures are expected to confirm inflation cooled to a 28-month low and may limit demand for the euro today.

Meanwhile, in the absence of any notable US economic data, any movement in the US dollar today is likely to be dictated by market risk appetite. Will ongoing tensions in the Middle East drive skittish investors back to the ‘greenback’?