GBP/USD struggles on surprise US inflation uptick

The pound struggled to gain a firm footing yesterday, with little from the latest labour market data that proved particularly encouraging.

The pound is on soft form this morning. GBP/EUR is flat at €1.1172, while GBP/USD is marginally below opening levels at US$1.3160. GBP/AUD is flat at A$1.7343, GBP/NZD has climbed to NZ$1.9200, and GBP/CAD remains stagnant at C$1.6805.

Read on to find out why yesterday’s employment figures were such a mixed bag…

What’s been happening?

The pound was on lacklustre form yesterday, with the latest UK labour market data providing little encouragement.

While average weekly earnings growth clocked in slightly above forecast at 2.2%, this is still far below the rate of consumer price growth, which data earlier this week showed to be at 3%. This means there is little sign that the squeeze on household budgets is set to lessen any time soon.

Additionally, the employment change report showed that the UK’s record-breaking run of growing employment had come to an end, after the number of people in work posted a surprise decline of -14,000.

This kept the pound on sluggish form versus the euro, with the latter also boosted by yet more strong signals coming from the Eurozone economy.

On a seasonally-adjusted basis the Eurozone trade surplus unexpectedly widened from €21 billion to €25 billion; on a non-seasonally adjusted basis the surplus climbed from €16.1 billion to €26.4 billion.

GBP/USD found it even harder to advance after the latest headline US data further cemented the likelihood of an interest rate hike next month from the Federal Reserve.

The rate of core inflation posted a surprise uptick from 1.7% to 1.8%, while advance retail sales growth slowed from 1.9% to 0.2%, defying economists’ forecasts of stagnation on the month.

What's coming up?

The pound could be in for some turbulence today, with upcoming retail sales figures potentially set to remind markets that the outlook for the UK’s service sector remains gloomy.

The monetary policy outlook is likely to see some volatility as well, with Bank of England officials Carney, Broadbent, Cunliffe, Place, Ramsden and Woods all due to give speeches.

The only Eurozone data today is the finalised October consumer price index figures for the currency bloc; unless these unexpectedly deviate from earlier estimates, they are unlikely to have much impact upon the euro.

The US data calendar contains nothing that will hugely impact USD, although some mild adjustments of the odds of monetary tightening next month could take place after the results of today’s initial and jobless claims, industrial production reports and speeches from several Federal Reserve officials.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Reaz Rahman
Senior Dealer

Reaz, our Senior Currency Dealer, joined us in January 2015. Reaz draws on his detailed knowledge of the foreign exchange markets to help customers to choose the right service and time to transfer.