18/05 – GBP close to year-to-date highs against USD

Jeremy Thomson-Cook
Jeremy Thomson-Cook 18 May 2021

GBP: Jobs growth encourages sterling strength

EUR: Tracking the USD

USD: Close to a 6 year low

Sterling

A stronger than expected jobs report and a weaker dollar are helping propel GBPUSD close to the highest levels of the year.

Jobs data from the UK showed the first gain in employment since the pandemic began with 84,000 gaining jobs in April as the economy emerged from the latest series of lockdowns. The labour market is very much a two-tier story at the moment; jobs either being snapped up by high-skilled workers furloughed or made redundant through the pandemic or low-skilled workers remaining unable to gain new employment.

Much like our expectations of retail sales movements in the UK (due Friday), businesses will be cautious to not overextend themselves and hiring rates will fall as we move through the rest of the year.

For now however, the pound is enjoying the stronger news and may be able to continue its growth if tomorrow’s inflation number is shown to be strong. We also have three Bank of England speakers today with Governor Bailey and Members Broadbent and Ramsden giving evidence in the Lords.

Euro

Today’s GDP announcement in Europe is unlikely to move markets given the preliminary figures released a few weeks ago and we expect the single currency to continue to trade on the broader theme of USD weakness.

US dollar

The wider dollar deterioration has continued overnight and we sit around 0.5% away from a 6 year low for the trade-weighted USD. With commodities heading higher – iron ore, oil – commodity currencies are making gains against the USD and could be the catalyst for further greenback losses.

Housing data from the US is unlikely to move things today and so dollar watchers should keep their eyes on vaccine headlines for hints of the global risk attitude.

Elsewhere

As expected, Japanese GDP missed market estimates overnight. The yen has weakened as a result and now sits around 1.5% away from its weakest level against the pound for over three years.

Market rates

Today’s interbank rates at 08:15 against sterling. Movement vs yesterday.

Euro €1.163 ↑
US Dollar $1.419 ↑
Australian Dollar $1.817 ↑
South African Rand R19.91 ↑
Japanese Yen ¥154.7 ↑

Have a great day everyone.