UK employment hits record highs - sterling rallies across the board

Claire Hogarth12/Jun/2014Currency Updates

GBP

London closed with sterling soaring up across the board taking leverage from the latest UK employment data coming in massively to the upside. Sterling marched up with strong gains against the dollar and euro.

It is official- the UK has gone back to work and it’s gone in hard. More people are now in work than ever before after record numbers of workers hit the books. The data is for the quarter leading up to April and is a fresh sign that the UK recovery has solid legs. Employment came in to the upside at around 345,000 jobs, the equivalent of 5,000 every day. Economists have described UK growth as extraordinary with recently both the IMF and BoE altering growth expectations. Right now the UK is the fastest growing economy in the developed world. The bullish view is leading to hot money tipping into UK investments and a strong pound.

The sting in the tail is that the jobs market is booming everywhere, excluding cash in workers pockets – there appears to be loads more work but little new dough. Average annual wage growth dropped to 0.7%, less than half the 1.8% rate at which prices are rising.

No data of note today, however the Chancellor and Carney will speak at Mansion House tonight, Osborne is expected to lift the curtain on new rules for the city to stem misbehaviour in FICC markets.

EUR

London closed with the euro flipping some of its previous losses against the dollar; however it reversed hard against sterling following strong UK employment data. The Asian session has seen a slight push back against the dollar. Presently the euro hovers around a 4 month low against the greenback and a 18 month low against sterling. Pressure continues to be applied due to the widening yield gap between Eurozone bonds and their major peers.

Naturally the euro has also been pegged back by the ECB cutting IR last week – imposing negative rates on excess cash deposited with it alongside other measures to ward off disinflation. The knock on effect has been predictable pushing down Eurozone money market rates and dipping the euro’s yield allure. As the short term outlook sees the euro being used as a funding currency we are seeing a number of euro/crosses hit lows mostly among the G10 pairs.

ECB monthly report and Industrial production is set for release today.

USD

London closed with the dollar edging lower against its most traded pairs with losses against sterling and the euro. The flash dollar run has slowed after traders dismissed expectations of an early Fed rate hike. Traders have abandoned the notion that recent strong US data and hawkish Fed comments signalled a less accommodative stance at next week’s Fed meeting. The dollar index, which measures the US dollar against a basket of its major currencies, slipped to 80.782. As usual the environment of uncertainty towards the results of the next week’s Fed meeting are leading most traders to dodge putting weighty positions into the market prior to hearing the lyrics from the Fed.

Bundles of data out of the US today including initial jobless claims, continuing jobless claims and retail sales.

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Written by Claire Hogarth

Marketing Executive at Ebury. English Literature graduate from the University of York and a motivated professional.