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US employment data could have currency implications today
It’s been another week of the pound trying to break above the narrow band it’s been in for nearly a year but being dragged back. Even so, GBP/USD remains well above the four-month lows it touched in April when the Iran war looked like it might spiral further out of control, while GBP/EUR is near its strongest level in nearly a year. The mood, then, remains cautiously calm.
For the US economy the big test lands this afternoon with Non-Farm Payrolls from the US Bureau of Labor Statistics. Will it repeat the optimistic numbers from JOLTs Job Openings on Tuesday and the positive PMI results this week, both of which show a US economy looking healthy despite inflation still at 3.8%? In which case how long can the US Federal Reserve resist the case for interest rate rises? That could put even more wind under the US dollar’s wings after a very positive past month.
Over in Frankfurt, the European Central Bank’s next meeting falls next Thursday, 11 June, and markets are currently pricing a 97% probability of a rate rise to 2.25%.
The oil story itself remains fluid. Brent crude prices have tumbled, reflecting optimism that the US and Iran are edging towards a 60-day memorandum of understanding to extend the ceasefire – but events don’t always support the optimism.
Back home, the Bank of England meets on 18 June with 3.3% inflation and few signs of that elusive economic growth. Governor Andrew Bailey has pushed back against market pricing that implies aggressive interest rate rises, but with the ECB and US Fed increasingly hawkish, the Bank may not be able to ignore the pressure.
With this backdrop, no surprise that this morning the Halifax House Price Index has echoed the Nationwide on Monday in showing house price falls once again in May, for the third month.
GBP: Waiting on Washington
Sterling has held up better than many expected given the turbulence of recent weeks, and against the euro it is near its best in almost a year. The Bank of England's 18 June decision – the same day as the Makerfield by-election – is the next domestic landmark to watch, but building up towards that will be the economic data, which starts next Friday with GDP.GBP/USD: the past year
EUR: Hike almost certain, tone hardening
The euro has been squeezed against sterling this week, with markets having already priced in a near-certain rate rise from the European Central Bank on 11 June. The ECB's hawkish turn – reversing a long run of cuts that ended in June 2025 – is the direct consequence of energy-driven inflation drifting away from its 2% target. The question after next week's meeting is not whether the ECB hikes, but how many more it signals.GBP/EUR: the past year
USD: Jobs data takes the wheel
The dollar has drifted through the week as traders held positions ahead of this afternoon's payroll release. With the Federal Reserve almost certain to hold rates at its June meeting, the real argument is about what comes after: a hike looks increasingly plausible if inflation stays above 3.5% and wages cannot keep up. The May Non-Farm Payroll number – due at 13:30 UK time – will either reinforce that case or give the dollar a reason to pull back sharply heading into the weekend.USD/GBP: the past year
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