Currency Note

Record earnings send sterling to 15-month high against dollar

By Alex Bennett July 11th, 2023

GBP/USD soared to a 15-month high yesterday

Monday morning saw a sharp dip for sterling against most major currencies. However, it largely recovered against the euro by the end of the day, and indeed the losses reversed against the US dollar and the renminbi. This morning sterling has surged upwards following unemployment and earnings data, reaching its highest level against USD since April 2022.

Governor of the Bank of England (BoE) Andrew Bailey made a speech at the Mansion House yesterday, in which he said that inflation would fall “markedly” by the end of the year, but that interest rates would continue to rise. He also had a warning on wages, saying: “Both price and wage increases at current rates are not consistent with the inflation target.”

He will not be thrilled at the data just released by the Office for National Statistics, saying that wages (excluding bonuses) rose by 7.3% in the past year, as per the previous month and some way ahead of expectations. Some of that money is finding its way to the high street, with retail sales up by 4.2% year-on-year. Unemployment rose to 4%, with 77,000 more unemployed people last month taking the total to 1.37 million.

In the business news, there is mounting misery for travellers this summer. London Underground drivers are going on strike later in July, as are other railway workers. And easyJet has cancelled 1,700 flights, blaming “unprecedented air traffic control delays”. The airline points out that it normally operates 1,800 flights per day.

For those staying at home, the trade body for UK Hospitality said that staffing was at crisis levels, with nearly 50% more vacancies than pre-pandemic.

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GBP: Jobs and earnings data send sterling higher

Sterling swung sharply upwards this morning following data on unemployment and earnings. It is currently close to 0.80% up on the US dollar compared to yesterday, at its strongest for 15 months.

The data continues tomorrow with the Financial Stability Report tomorrow, and then GDP on Thursday.

GBP/USD past year

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EUR: Positive day for euro, as markets wait on German mood

The single currency had a broadly positive day yesterday, strengthening against all but the Japanese yen. Since mid-last week it has gained well over 1% against the US dollar.

There was no data of note yesterday, but today we have just heard a final result for German inflation of 6.4%. Shortly we’ll hear the ZEW Economic Sentiment Index, which is expected to fall further.

Over the next two days, we will hear Spanish and French inflation too.

USD: Dollar slides in quiet day for data

Not a positive start of the week for the US dollar, sliding by as much as 0.6% against some rivals, notably JPY, and this morning hitting its lowest against GBP for over a year.

Treasury Secretary and ex-chair of the Federal Reserve Janet Yellen has been visiting China, trying to smooth over some of the differences between the two countries.

There were no particularly interesting data releases yesterday, or indeed today, but tomorrow we’ll hear inflation, and that could easily move the market. Around 3.1% is expected – down from last month’s 4%.

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