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Sterling Up on data but a weak USD steals the show

Market Analysis

GBPUSD, H1

Sterling is higher in the wake of the UK labour data release. Cable clocked a new post-Brexit vote high of 1.4119, adding to the biggest weekly gain the pair has seen since last September, while EUR-GBP fell to a one-month low at 0.8729. While the jobless rate remained unchanged at 4.3%, as expected, and the headline average household income figure came in at 2.5% y/y, also as anticipated by markets, commentaries are pointing to the 102k rise in employment, which smashed the Reuters median expectation for a 13k contraction and brings the y/y tally to a gain of 415k, feeding the narrative of tightening labour market conditions and increasing risk of second-round inflationary pressures. The ex-bonus average wage figure also slightly beat the median forecast, rising to 2.4% y/y versus the expectation for an unchanged 2.3% outcome. The pound is presently showing a 2.0% w/w gain on the dollar, a 0.7% w/w rise versus the euro and a 0.5% w/w advance on the yen. Expectations for a post-Brexit transition period to be announced before month end have been giving the pound an underlying bid in recent sessions

GBPUSD at 1.4100 is more to do with the rolling USD weakness as it is to do with inline UK data.  The news from Davos adds to USD weakness as US Treasury Secretary Steve Mnuchin suggests a weak USD  is good for the US and Trade Secretary Wilbur Ross hinted that there are more tariffs to come as he said the the US is in a trade war “every single day”. President Trump arrives in Davos tomorrow to deliver the finale for the World Economic Forum, expected the unexpected.

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Stuart Cowell

Senior Market Analyst

HotForex

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