GBP Exchange Rates Strengthen on Strong Wage Growth Figures, Pound to US Dollar Recovers to Highs
Sterling trended higher on Tuesday, with the Pound to US Dollar moving back above $1.37 and GBP/EUR making solid gains.
The gains came from GBP finding support on the UK’s better-than-expected jobs report.
This revealed that the UK’s unemployment rate climbed to 5% in November, rising to its highest levels since 2016, but below the consensus forecast of 5.1%.
However, it was the accompanying earnings figures that most impressed GBP investors with wage growth surging from 2.8% to 3.6% over the same period, easily outpacing expectations for a modest 2.9% rise.
Coming up, the focus for GBP investors is likely to return to UK coronavirus developments, with any additional hints that the government will extend the national lockdown potentially weighing on the Pound.
Euro Tempered by Italian Political Crisis
The Euro benefitted from broad weakness in the US Dollar yesterday thanks to the negative correlation in the world’s most traded currency pairing.
But the single currency struggled to translate this into any meaningful gains against its other peers following Italian Prime Minister Giuseppe Conte’s ‘tactical’ resignation as he seeks to form a new government.
The Euro looks to face additional headwinds today after data published earlier this morning revealed that German consumer confidence plunged to an eight-month low in February.
Euro exchange rates are struggling so far this morning as the GBP/EUR exchange rate has hit €1.13 again.
US Dollar Slides in Risk-On Trade
The US Dollar fell back on Tuesday as the appeal of the safe-haven currency was undermined by broad improvement in market risk appetite.
Despite fresh uncertainty about the size and timing of Biden’s stimulus package amidst opposition from Senators, the International Monetary Fund’s (IMF) revision of its 2021 global growth forecast from 5.2% to 5.5% helped to cheer markets.
Centre stage today will be the Federal Reserve’s first rate decision of 2021.
No policy changes are expected from the Fed this month, but the Fed is likely to welcome Biden’s efforts to pump more fiscal stimulus into the US economy, whilst also signalling that it remains committed to maintaining its accommodative policy to help support the recovery. An outcome which may further weaken the US Dollar
Canadian Dollar (CAD) Firms as Oil Prices Tick Higher
The Canadian Dollar (CAD) saw some modest gains yesterday as the commodity-linked ‘Loonie’ found support from an uptick in oil prices.
Australian Dollar Finds Fleeting Gains Following Inflation Release
The Australian Dollar struck higher overnight on Tuesday, immediately following the publication of a stronger-than-expected domestic inflation release, but was unable to sustain these gains amidst a slump in market sentiment.
New Zealand Dollar Stalls Ahead of Fed
After strengthening on Tuesday, the New Zealand Dollar found itself mostly rangebound in overnight trade as investors were reluctant to make any aggressive bets on the risk-sensitive currency ahead of the Federal Reserve’s latest policy meeting.