Sterling has recovered some its recent losses following better than expected UK job and earnings figures.
The data showed the unemployment rate declined to 4.2% in the three months to June versus expectations for an increase to 4.5% (and a previous reading of 4.4%). Furthermore, the average earnings in the three months from April to June came in at 5.4% versus expectations of 4.6%. This has supported the Pound as it reduces expectations for how aggressive the Bank of England will be with future rate cuts.
There’s been a rebound in global stock markets after last week’s sharp selloff which has improved risk sentiment and encouraged investment back into the Pound. However, there is still underlying cautiousness in the market around the deepening crisis in the Middle East and how far things will escalate. This is keeping the USD more resilient against its peers and seemingly keeping a lid on the GBP/USD rate at the moment.
As a result, the GBP/USD rate has recovered around 1.1% from last week’s low and currently trades at an 8-day high. The GBP/EUR rate is up by around 1.2% from last week’s low and also trades at an 8-day high. Further clues on how well the UK economy is doing will be provided by tomorrow’s UK inflation data, Thursday’s UK growth data and Friday’s UK retail sales figures. So, we might see further volatility in the Pound as the week progresses. We also have some key US data releases this week, including US inflation figures (Weds), US retail sales (Thurs) and US consumer sentiment (Fri).
