Pound (GBP) trades erratically after uneven labour figures
The pound (GBP) lacked a clear direction on Wednesday, swinging back and forth amid choppy market conditions and a mixed UK employment release.
Figures showed the UK unemployment rate unexpectedly remained at a multi-year high in November, even as the number of people in work rose by more than economists had predicted over the same period.
Attention now turns to the UK’s latest consumer price index. While inflation exceeded expectations by rising from 3.2% to 3.4% in December, Sterling’s reaction has so far been limited.
Euro (EUR) rallies as German confidence surges
The euro (EUR) climbed to fresh multi-week highs yesterday, initially benefiting from its inverse correlation with a struggling US dollar (USD).
The single currency then received an additional lift from Germany’s ZEW economic sentiment index, which beat forecasts decisively to reach its strongest level since July 2021.
Looking ahead, European Central Bank (ECB) President Christine Lagarde is scheduled to speak later today. Any remarks on the potential impact of tariffs on Eurozone growth or inflation could inject volatility into EUR exchange rates.
US dollar (USD) extends losses on tariff concerns
The US dollar weakened further on Tuesday, edging closer to a year-to-date low as fresh tariff threats from President Donald Trump continued to undermine confidence.
Markets are wary that any new US tariffs on European partners could prompt retaliation from the EU, harming the US economy and potentially discouraging European investors from buying US Treasuries.
Later today, Trump is set to speak at the World Economic Forum in Davos. A confrontational tone could trigger another bout of USD selling.
Canadian dollar (CAD) rebounds as oil prices recover
The oil-sensitive Canadian dollar (CAD) initially came under pressure yesterday but was able to recover some ground later in the session, supported by firmer crude prices.
Movements in oil markets may remain a key driver for the commodity-linked ‘loonie’ today. A pullback in prices could weigh on CAD.
Australian dollar (AUD) supported by commodities and risk appetite
The Australian dollar (AUD) strengthened overnight, buoyed by higher commodity prices and a more optimistic mood across Chinese markets, both of which lent support to the ‘Aussie’.
New Zealand dollar (NZD) lifted by improved sentiment
The New Zealand dollar (NZD) also advanced overnight, benefiting from an improvement in risk appetite.
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