US Non-Farm Payrolls beats estimates for 13th consecutive month
Tuesday 9 May, 2023
Daily Currency UpdateGBP/USD is trading above 1.26 this morning despite another strong jobs report from the States on Friday. Over-performance from the UK economy and expectations that the Bank of England will continue to slowly hike rates into the summer are helping support sterling. GBP/EUR has also broken out of its recent ranges with it getting close to the 1.15 level for the first time this year. The next BoE policy decision is due on Thursday at midday with another 0.25% hike widely predicted. Should this come to fruition then it will be the accompanying commentary from BoE Governor Andrew Bailey that will drive the direction of the pound. The decision is followed by a press conference and the latest quarterly Monetary Policy Report which will give the Banks updated expectations on inflation and growth for the next two years. Given the resilience of the economy, it seems we could see growth estimates upgraded. The level of inflation may also be expected to remain higher for longer so further hikes in June and August may also be telegraphed by Bailey. GBP/USD is around 1.2620 with GBP/EUR at 1.1490.
Key MoversThe monthly US Non-Farm Payrolls released on Friday beat estimates for the 13th consecutive month. An extra 253k jobs were added to the economy in April well above the expected 181k. The unemployment rate unexpectedly dropped to 3.4% and wage growth also came in hot. The previous month’s reading was revised significantly lower however from 236k to 165k which may be the reason that after strengthening straight after the publication the US dollar weakened off with GBP/USD dropping below and then quickly retaking 1.26. EUR/USD reaction was similar with it briefly dipping below 1.10 before ascending above the key number later that afternoon. Looking ahead this week’s key data will be tomorrow’s inflation print from the States. The Consumer Price Index is expected to hold steady at 5% y/y with the core reading (which strips out food and fuel costs) can be expected to slip a touch to 5.5% from 5.6% y/y. Stock markets are down this morning which is likely due to some jitters that the ongoing out-performance in the US labor market may lead to a high inflation print. For the Eurozone, it is a quiet week with little macro-data of note. EUR/USD has slipped under 1.10 again this morning as risk aversion in the markets see investors seek the safety of the dollar.
- GBP/USD: 1.2560 - 1.2700 ▲
- GBP/EUR: 1.1360 - 1.1530 ▲
- GBP/AUD: 1.8530 - 1.8710 ▼
- EUR/USD: 1.0940 - 1.1080 ▼