Stronger-than-Expected Wage Growth and Unemployment Drop Boosts Pound Sterling
The Pound was on strong form yesterday after the latest UK employment and borrowing figures largely bettered forecasts.
Particularly heartening for the markets was an acceleration in average weekly earnings from 2.6% to 2.8% which, combined with yesterday’s slowdown in inflation, means that the squeeze on household budgets is starting to soften.
Also supporting the Pound was a drop in unemployment back to 4.3%, which is the joint-lowest recorded since 1975.
The Bank of England (BoE) announces its latest monetary policy decisions today. The Pound could rise sharply if the Monetary Policy Committee (MPC) indicates that a rate hike will indeed be necessary in May.
Market Caution ahead of US Policy Announcements Prevent GBP/EUR Exchange Rate from Advancing Far
Market conditions were supportive of the Euro yesterday, meaning that the GBP/EUR exchange rate was only able to inch above opening levels.
Despite a lack of Eurozone data, the fact that the US Dollar and the commodity trio were weakened by the approach of the evening’s US monetary policy announcements kept demand for the common currency strong.
FOMC Hikes Rates and Raises Economic Forecasts: GBP/USD Surges
Demand for the US Dollar was weak yesterday ahead of monetary policy announcements from the Federal Open Market Committee (FOMC). This allowed the GBP/USD exchange rate to gain half a percent, even though markets were expecting US policymakers would announce a 0.25% hike to interest rates.
Surprisingly, after the policy changes were announced it was the US Dollar that slumped, despite the expected rate hike and a confident outlook for the US economy.
Markets took the opportunity to profit from the fresh round of tightening, with the revised economic forecasts expected to only benefit the monetary policy outlook for 2019, suggesting only two more rate hikes are on the table for this year.
Today’s US initial jobless claims figures for the week ending 17 March are expected to show that claims remained around a very healthy 225,000, which could support the US Dollar’s recovery.
GBP/CAD Sinks: Canadian Dollar Races Higher on Hopes for NAFTA Breakthrough
The Canadian Dollar raced higher yesterday after Prime Minister Justin Trudeau stated that he believed it was ‘eminently possible’ an agreement could be reached on a new North American Free Trade Agreement (NAFTA).
The deal has been under threat since US President Donald Trump took power and threatened to withdraw completely. Trudeau’s confidence raised investor hopes that Canada would still be able to benefit from a comprehensive agreement with by far its largest export market.
A speech by Deputy Governor of the Bank of Canada (BOC) Carolyn Wilkins could give the Canadian Dollar a boost today if she says anything positive about the outlook for monetary policy.
GBP/AUD Records Small Gains as RBA Meeting Minutes Leave Markets with Little Hope of Near-Term Tightening
The GBP/AUD exchange rate had made strong gains early on yesterday, but shortly after the FOMC announcements the pairing was back where it had started.
The Australian Dollar was given a boost by the USD selloff; demand for high-risk assets increased after signs the Federal Reserve was still only likely to hike rates twice more this year.
GBP/NZD Makes Sharp Gains as RBNZ Monetary Policy Announcement Approaches
The New Zealand Dollar had monetary policy announcements from the Reserve Bank of New Zealand (RBNZ) as well as the Federal Open Market Committee to contend with yesterday.
This allowed the GBP/NZD exchange rate to make gains of around half a percent yesterday, even though the Australian Dollar and Canadian Dollar were performing much better.