Currency Update - The Pound Bounces Back

GBP: Sterling rebounds on jobs

The benefit of a battered currency is that it doesn’t take much to trigger a rally. Yesterday a solid set of UK jobs data brought buyers back to Sterling.

Unemployment remains at a 42 year low and annual growth in earnings is running at 2.9%, which means wages are running ahead of inflation – a rare occurrence in recent years.

The fragile state of the UK economy has been the fly in the ointment lately as investors scale back expectations of rate hikes. It will of course take more than one decent day of data to turn sentiment.

Two different members of the Bank of England’s rate setting committee are due to give speeches today and tomorrow. Investors will be listening closely for further forward guidance.

EUR: Euro slips as Germany wilts

Yesterday brought further evidence of a slowdown in Germany – the powerhouse of the EU.

German GDP (economic growth) came in below forecasts and the latest ZEW Sentiment Survey (economic sentiment) produced a negative reading. It’s another sign that the economic recovery in the EU is spluttering, ruling out hopes that the European Central Bank might tighten this year.

Today will be a busy day for the Euro with German and Eurozone CPI (inflation) as well as ECB President, Mario Draghi, giving a speech in Frankfurt. Draghi has been concerned about the rising Euro, so he will be liking its recent retreat.

USD: Dollar near 5-month highs

After a pause last week, the Dollar has resumed its rise. It is now near 5-month highs as measured against a basket of the world’s other major currencies.

The yield on the benchmark 10-year Treasury yield rose above 3% again. The rising yield suggests markets are worried about US inflation, and in turn, may force the Fed to raise rates.

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Current rates:

Wednesday 16th May 2018 at 12:00

£1.00 GBP = 1.1430 EURO

£1.00 GBP = 1.3473 USD

£1.00 GBP = 1.7987 AUD

£1.00 GBP = 1.9568 NZD

£1.00 GBP = 1.7323 CAD

£1.00 GBP = 16.8946 ZAR

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