Home Daily Commentaries UK jobs report boosts the pound

UK jobs report boosts the pound

Wednesday 18 January, 2023

Daily Currency Update

GBP USD steadily climbed back closer to a one-month peak after employment data from the UK posted a better-than-expected reading. Average earnings climbed by 6.4% according to the Office for National Statistics in the September to November period whilst unemployment claims dropped to 19.7k in December, which is the lowest level in almost 50 years. This wage inflation does put pressure on general inflation of course, which puts the Bank of England in a difficult place around interest rate hikes, which is the reason why the GBPUSD pair has struggled to break above 1.23. There is the expectation that the central bank may need to raise rates by 50 basis points during its February meeting, which may push GBPUSD further higher in the near term.

Key Movers

All eyes are on Cristine Lagarde who speaks tomorrow, for signs of the ECB's recent hawkish stance on their interest rates and inflation situation. EU metrics have been stronger than expected of late, and the market expects the ECB to tighten monetary policy and raise rates rapidly in 2023 to ease inflationary pressure on the single bloc. The US Dollar drives weaker as the Chinese Covid-19 story, which dominated the market for much of December, appears to have taken a back seat. The market remains tentative about this story, and any murmurs of further disruption in the supply chain, especially with the Chinese New Year in February, could quite easily see the US Dollar strengthen again on global risk aversion trading.

Expected Ranges

  • GBP/USD: 1.2330 - 1.2445 ▲
  • GBP/EUR: 1.1430 - 1.1515 ▲
  • GBP/AUD: 1.7545 - 1.7715 ▼
  • EUR/USD: 1.0755 - 1.0865 ▲