Improved employment data boosts GBP

There were some positive surprises in this morning’s UK employment data. The unemployment rate remained at 4.2%, when the markets had expected a rise. The markets had also estimated a fall of nearly 200,000 jobs in the three months to September, whereas the economy actually created 54,000 new roles. The forecasters’ third error was an expectation of average earnings falling from 8.2% in August to 7.4% in September. The actual average earnings rise including bonuses was in fact 7.9%. This is all quite bullish and it reduces the likelihood of early interest rate cuts from the Bank of England. Unsurprisingly, sterling benefited from this news as investors bought the pound. The GBP/USD rate is a tad below the overnight highs but still looks healthy at $1.2290. GBP/EUR is also near the top of its recent ranges at €1.1480 and the pound is up against the Aussie dollar at AUD 1.9310 and the Kiwi dollar at NZD 2.0940.

Eurozone GDP due – euro holding its own

It is going to be a lively day for the euro, which will be pulled from pillar to post by economic growth data, a number of business sentiment indices and a plethora of European Central Bank speakers. The GDP data is unlikely to set the world on fire. The markets have forecast just 0.1% annual growth in the year 2 Q3 based on a 0.1% contraction in the third quarter itself. Interestingly, the euro is holding relatively firm ahead of what is expected to be largely negative data. As mentioned above, The GBP/EUR rate is a little higher at €1.1480 but the EUR/USD rate has also pushed a little higher to this morning’s $1.0705. That latter exchange rate will also be impacted by this afternoon’s US Consumer Price Index, which is forecast to have fallen to around 3.3% in the year to October.