Sterling jumps on employment data despite BOE warnings
Bank of England Governor, Andrew Bailey threw a few very unhelpful phrases into his answers before the treasury select committee yesterday. He claimed the BOE couldn’t stop inflation from hitting 10%, although he didn’t actually say it would do so. He cites the rise in food prices as ‘apocalyptic’ and said he believed the Bank of England could not have done anymore to control inflation in the face of these unexpected market shocks. None of this was particularly market moving and Sterling had a relatively positive day. The pound jumped this morning though on the back of surprisingly strong employment data. The unemployment rate came down to 3.7%; the lowest level since the early 1970s. Not only that but, for the first time on record, there are fewer unemployed people than job openings. That follows a drop of 56,900 in the claimant count and, although core average earnings were only up 4.2%, that is still above the market forecasts. So Sterling is stronger; testing USD 1.24 again, as it last did on the 5th of May. A break could see us shoot through to $1.2550. The Pound also broke through EUR 1.18 and is nearly half a cent higher at the moment.
Euro steady ahead of GDP and retail sales
The President of the European Central Bank, Christine Lagarde made it very clear yesterday that we can expect an interest rate rise from the ECB in July and the markets are fairly convinced that eurozone interest rates will be in positive territory by the year-end. That didn’t really affect the euro in the positive way Mrs Lagarde may have expected. It will still mean the ECB is the laggard amongst central banks and it is unlikely to entice investors to buy the euro. Setting that aside, the markets are poised for European Gross Domestic Product Data today, along ways employment figures answer minor consumer price inflation numbers. The previous estimates of annual GDP in the year to March came in at 5%. Any change to that will impact the euro positively or negatively and President Lagarde is due to speak again this evening. Such a busy bee. At the moment, the EURUSD rate is creeping above $1.0450 but the GBPEUR rate is also rising and that looks set to test €1.19 before the morning is over.
Mixed fortunes for USD as Chairman Powell anticipated
Although the US dollar has weakened against the ebullient pound, it is faring better against other currencies. whereas Monday gave us almost no US news, today will be a very different story. Deep breath…. the Federal Reserves Red book Index will be published along with capacity utilisation, industrial production, business inventories, crude oil inventories and a speech from the Chairman of the US Federal Reserve, Jerome Powell. All of that should keep the US Dollar busy but any hints of a change of pace from Jerome Powell will be the most critical element.