The pound made gains on Tuesday as data showed that the UK economy created jobs at the fastest rate in the last year in the three months leading up to November. This has slightly weakened the Bank of England’s case for a rate cut. The pound gained 0.3% against the dollar and euro. The job creation was much higher than was forecast in polls however wage growth was it its slowest since Q2 last year. With inflation low, real term wages have still increased.
Analysts believe that even if the Bank of England do not lower rates, this will come later in the year. Therefore, the pound will remain vulnerable until there is further clarity on the UK’s economic outlook. The probability of a rate cut currently sits at 66%.
GBPUSD opened at 1.2998 and jumped sharply to a high of 1.3074, retreating only slightly to close at 1.3046
GBPEUR opened at 1.1718 and quickly jumped to 1.1756 and was flat for the rest of the day until it closed at 1.1760
The Chinese yuan fell on Tuesday as safe-haven currencies rallied as the spread of the new coronavirus reduced risk appetite. Global stocks fell as the outbreak triggered memories of the SARS virus in 2002-2003 which killed nearly 800 people globally. US officials confirmed their first case of the virus in the US. The dollar index gained 0.6% alongside gains for the Swiss franc and Japanese yen.
Currencies linked to tourism made losses and the euro erased gains against the dollar from positive economic data. The single currency also benefitted from reports that the European Central Bank will give an improved outlook for the region when it meets on Thursday.
EURUSD opened at 1.1092 and jumped to an early afternoon high of 1.1117 before quickly dropping back to close at 1.1097