By Matthew Boyle
Yesterday saw the Pound creep once again closer to 2.5 year lows against the single currency. Poor UK employment data yesterday showed an increase in unemployment, whilst the wage market remains stagnant. Ten thousand more people became unemployed in September and wage growth was down to 4.4% from 6% at the start of the year.
With the UK economy flagging, this is increasing the likelihood of a Bank of England interest rate cut in the coming months. Whilst odds for a cut in November are still way under 50% (some suggest around 30% currently), this poor data is catalysing an earlier cut by the BoE, which in turn has increased downward pressure on GBP/EUR.
With this is mind and the UK budget due on the 26th November we expect pressure to continue for GBP/EUR. With the rate sat on the 2.5-year low already, should the market price support at this level break, we could see it push further lower. However, with clear pricing support at this level, any economic recovery or Euro weakness would provide a platform for a Pound recovery.
Elsewhere the Dollar continued to strengthen, amidst positive US ecostats and following Trump’s announcement of the peace deal in the Middle East, settling some of the uncertainty on international markets.
Given a strong Dollar against the Pound usually makes the Euro weaker this might spell trouble as both appear strong against GBP at present. Should the Dollar start to weaken again, would the increased strength this would give to the single currency be enough to push it to new multi-year lows?
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Wed
13.00 USD Manufacturing data
4.45 GBP BoE Breeden speech
Thu
07.30 GBP GDP data
13.15 USD Jobless claims
13.30 USD Retails Sales
17.00 EUR ECB Lagarde speech
Fri
13.00 USD IMF meeting