Pound (GBP) jumps on upbeat releases before sharp reversal
The pound (GBP) firmed yesterday even as UK unemployment climbed to a four-year high, after the latest labour market report showed some resilience and stickier-than-expected wage growth.
Sterling demand was further supported by the UK’s preliminary services PMI for December, which beat forecasts and pointed to a pick-up in activity.
Those gains were swiftly erased this morning, however. The UK’s consumer price index showed inflation slowing from 3.6% to 3.2% in November, well below the 3.5% consensus forecast. The softer reading triggered increased speculation that the Bank of England (BoE) could deliver multiple interest rate cuts over the coming months, dragging the pound lower.
Euro (EUR) edges up as signals remain mixed
The euro (EUR) traded unevenly yesterday but managed to post gains against weaker counterparts amid a mixed batch of economic data.
Eurozone PMIs for December fell short of expectations, indicating a contraction in business activity this month. Offsetting this somewhat, Germany’s ZEW economic sentiment index surprised to the upside, rising to a five-month high.
Germany’s latest business climate survey showed a slight decline this morning, which could subdue EUR through the first half of the session.
US dollar (USD) slides as labour market shows strain
The US dollar (USD) fell to fresh multi-month lows yesterday as markets absorbed the latest US employment figures.
The long-awaited non-farm payrolls reports suggested a cooling jobs market, while unemployment rose from 4.4% in September to 4.6% in November. This strengthened expectations that the Federal Reserve may deliver several interest rate cuts next year.
Looking ahead, speeches from two Fed officials could influence USD direction today. Should both strike a dovish tone, the ‘greenback’ may face further downside pressures.
Canadian dollar (CAD) pressured by weaker crude prices
The commodity-linked Canadian dollar (CAD) also struggled yesterday, with falling oil prices weighing on the ‘loonie’.
In the absence of key Canadian data today, movements in crude prices are likely to remain the dominant driver of CAD. A rebound in oil could help lift the currency.
Australian dollar (AUD) subdued as risk appetite fades
The Australian dollar (AUD) traded quietly overnight as a cautious market mood dampened demand for the risk-sensitive currency.
New Zealand dollar (NZD) steady amid thin calendar
The New Zealand dollar (NZD) also saw limited movement overnight, with a lack of data and uncertain sentiment keeping the currency rangebound.
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