Loose UK labour conditions outweighs the UK GDP recovery.. |
The Pound remains the best performing G10 currency so far this year, but is under some pressure this week after traders boost the chances of a June interest rate cut. This was on the back of the latest ONS labour report, which is a key metric for the BoE in determining what happens next with interest rates. Employment in the UK fell in January, which meant the unemployment rate rose slightly to 3.9%. Average earnings also fell further than expected (one of the main drivers for inflation) and this is the reason for GBP's slight wobble. However, UK GDP returned to growth in January to help stop any further slip in the market for the Pound. A strong recovery in the all-important services sector means that the technical recession could be short-lived. Positive sentiment should remain too after both fiscal and monetary loosening in the UK. Elsewhere, the US had yet another small blip in their inflation reading with both the core and headline number arriving above expectations. Inflation is still heading down in the US, just at a very consistently slow pace, which is why the Fed are holding off on cutting interest rates for now. |