Ahead of the closely watched UK employment report this morning, sterling’s performance was strong yesterday, managing to gain ground on both the dollar and the euro.
After depreciating slightly in the morning session, GBPUSD had tested the 1.31 handle by the mid-afternoon. Opening the day at 1.3060, cable was unable to sustain its high of the day and finished the trading day back below 1.31 at 1.3081.
GBPEUR was also up on the day yesterday, finally being able to maintain itself above the 1.11 mark. The pair opened yesterday at 1.1099, only to finish strong at 1.1127 at the close.
However, after a disappointing employment report at 7:00 this morning, sterling’s resilience is fading. The release this morning shows that for the month of July, +94.4k people in the UK are claiming unemployment related benefits; given that it was forecasted at 10k, and the previous reading was -28.1k, this does not paint a hopeful picture for the UK jobs market. To make matters worse, Average Earnings for June also came in below forecast and fell into negative territory. Unemployment holds firm at 3.9%, the same figure for the last 3 months.
Turning our attention to the US, the dollar index was back up yesterday reaching 93.568 – which is a significant improvement from Friday’s 2-year low of 92.495. The greenback has had a rough ride of late, but its decline seems to have come to a halt (for now). Whilst the Republican and the Democrats continue to battle it out in senate in regard to the COVID-19 relief package, economists are closely watching the deteriorating relationship between Washington and Beijing. In this ongoing ‘tit-for-tat’, China has imposed sanctions on 11 US citizens (including Republican lawmakers) as a direct retaliation to the US imposing sanctions on Chinese and Hong Kong officials.
As a result of USD strength, EURUSD has been unable to reach its levels achieved in recent weeks. Opening at 1.1768 yesterday, over the course of the day the pair was unable to test 1.18, closing the session off at 1.1755.
On the data front, shortly we have the ZEW Economic Sentiment for August being released for both Germany and the Eurozone as a whole. Later this evening, we have FED member Mary Daly giving a speech. Considered a centrist, any news or hints given on future moves will be closely scrutinized.