Sterling performed reasonably well yesterday and managed to make ground against the US dollar and the euro, courtesy of poorer data releases in those areas. Notably, we saw the UK currency push back above the 1.68 threshold against the US dollar.
Sharp rate movements in sterling rates are expected throughout the day today as a result of a packed schedule of UK data and events. At 9.30am the Office for National Statistics will reveal whether the rate of unemployment in the UK has shifted from last month’s figure of 6.5%. Employment figures are always important to the strength of a currency as it is positively correlated with consumer spending. At the same time, we expect the release of the Average Earnings Index, which will indicate whether or not wages are rising in line with prices. This area of the recovery has been lacking so far in the UK and continually low figures will undermine the strength of recovery. Later in the morning the Bank of England (BoE) will release its Inflation Report and BoE Governor Mark Carney will speak. Carney’s public addresses have been accompanied by periods of fluctuations in sterling rates as traders attempt to decipher his rhetoric and look for clues as to when future interest rate rises will occur and how monetary policy will develop.