GBP had a big reversal day yesterday as can be seen by a sea of red in the data below. However, UK job numbers for the three months into April this morning has given GBP a boost, with wages numbers exceeding expectations and rising to 7.2%, just below the peak of 7.3% reached in 2021. The unemployment rate also dropped to 3.8% when analysts were expecting a rise to 4%. The biggest rise in recent jobs growth is largely attributed to health, social care, and hospitality. Markets continue to price in more tightening by the BoE, with low chances of rate cuts in 2024.
* Daily move - against G10 rates at 5:00pm, 12.06.23
** Indicative rates - interbank rates at 5:00pm, 12.06.23
All eyes on US inflation numbers today with expectations of continued easing in price pressures. The data comes ahead of the Federal Reserve meeting tomorrow, where markets currently price in a 25% chance of a 0.25% hike. The core CPI print will likely be the market driver and any upside on the numbers will likely bring in a higher probability of a hike tomorrow. USD is weaker across the board so far this morning.
On the fringes we have ZEW survey data from Germany and Europe, and we have several BoE members speaking today - hawkish undertones will be looked for following this morning's job numbers.
The Bank of England will be feeling the heat following recent data suggesting that the job isn't done in curbing inflation. Market pricing continues to add more rate hike expectations, and at present no rate cuts can be seen in 2024. Risks remain of dovish repricing on rate hike expectations following recent data suggesting that in May there could be a slowdown in the job market, as well as continued concerns on the property market. But for the time being, GBP continues to ride to optimism wave and stays near 12-month highs.
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