Pound starting to recover

Jeremy Thomson-Cook
Jeremy Thomson-Cook 16 November 2021

GBP: Job and wage growth surprises with strength 

EUR: Same old story

USD: Get ready for Fed speakers

Sterling

This morning’s strong jobs report – falling unemployment and rising wages – is exactly the salve that a battered pound needed. While it is too early to say whether the labour force has meaningfully dealt with all those who ended the furlough scheme still claiming government support payments, a couple more months of similar improvement will show a jobs market that glided through the end of furlough instead of crashing.

With earnings now growing at near 6%, focus now shifts to tomorrow’s inflation number.

In the meantime, that jobs report will allow for a little bit of sterling strength as investors cautiously bet on a rate hike on December 16th.

Euro

It feels a little like Groundhog Day but there is little more to say on the euro that hasn’t already been said. It’s not receiving support from the European Central Bank; rate rises are being priced out of 2022 meetings as opposed to priced in for competitor currencies and we have to therefore maintain a weakening bias on the single currency through the end of the year.

In the short term, we’re looking for EURUSD to move towards 1.13 and GBPEUR to try and push towards 1.1950.

USD

Dollar strength was maintained yesterday and should push on further this afternoon if our expectations are met. US retail sales are due this afternoon and, despite a poor consumer confidence number last Friday, we expect sales to have been maintained at a strong level.

Similarly, today starts a slew of Fed speakers and their comments are sure to focus on the higher inflation seen last week. While some are known to be gagging to raise rates, most are not so we will be watching for tonal changes to see whether the marginal Fed committee member has changed their mind and rates are set to rise earlier than next summer.

Elsewhere

Improving relations between China and the US have allowed a slight gain for the Chinese yuan and the Australian dollar overnight. Despite announcing no new breakthroughs, a call between Presidents Biden and Xi was said to be cooperative.

Market rates

Today's Interbank Rates at 08:18am against sterling movement vs yesterday.

Euro

€1.1816

US dollar

$1.344

Australian dollar

$1.831

South African rand

R20.47

Japanese yen

¥153.6

Have a great day.