Sterling is back on the offensive
The pound remained buoyant on Tuesday but struggled to find meaningful gains on the back of some mixed employment figures.
Sterling is back on the offensive this morning however, with GBP/EUR climbing to €1.1654 and GBP/USD rallying to $1.4166. GBP/CAD and GBP/AUD are buoyed at C$1.7821 and AU$1.7905, respectively, while GBP/NZD is muted at NZ$1.9212.
Looking ahead, we suspect GBP exchange rates will continue to appreciate today as the outlook for the UK economy becomes increasingly bright.
What’s been happening?
The pound continued to firm yesterday, but failed to match the pace seen in recent sessions as GBP investors responded to the UK’s latest jobs report.
Data published by the Office for National Statistics (ONS) revealed the UK’s unemployment rose to 5.1% in December, with the massive loss of jobs in the hospitality sector driving the jobless rate to its highest levels since 2016.
However, the accompanying earning figures were much more positive, with the 4.7% surge in wage growth offering modest gains to Sterling.
The US dollar, meanwhile, trended lower on the back of comments by Federal Reserve Chair Jerome Powell as he testified before Congress.
Powell noted that while the economic outlook has brightened, the US remains a long way from achieving its inflation and employment goals, whilst also stating the Fed will not tighten monetary policy solely in response to a strong job market.
At the same time, the euro struggled to find support on Tuesday as the EU’s ongoing struggle to accelerate its vaccine rollout stoked concerns over the Eurozone’s economic recovery this year.
What’s coming up?
Kicking off today’s session was the publication of Germany’s latest GDP figures, which may offer some support to the euro this morning after domestic growth was revised up to 0.3% in the last quarter of 2020.
In the UK, the focus is likely to return to domestic coronavirus statistics. Boris Johnson has stressed that progressing through to each stage of the government’s lockdown easing plans will require infection levels to continue falling, so expect the pound to remain supported as long as the positive trends continue.
Meanwhile, across the pond, Powell’s testimony will enter its second day, but is unlikely to provide any fresh impetus for the US dollar. Instead, USD investors will be focused on US stimulus developments amidst hopes that President Biden’s $1.9 trillion package could be passed by the end of the week
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