The GBP losses seen at the start of the day were tempered by close - a sign, perhaps, of markets rationalising that the recent turmoil in bond markets was not as bad as it was during the Autumn Budget in 2022.
Whilst the Bank of England (BoE) did not have to act on this occasion, they are currently expanding their toolkit to deal with dysfunction in the bond markets by allowing eligible non-bank financial institutions to borrow cash against gilts (UK government bonds). Whilst any immediate concerns have been alleviated, it does seem like last year's positive sentiment on GBP is now unwinding.
*Daily move - against G10 rates at 7:30am, 10.01.25
** Indicative rates - interbank rates at 7:30am, 10.01.25
After some hawkish Federal Reserve (Fed) comments last night, focus today falls on December’s job numbers, with markets expecting a figure of 165,000 new job additions, and the unemployment rate expected to remain at 4.2%.
However, taking onboard recent Fed commentary, there is potential for the numbers to show the job sector doing better than expected, and thus giving even further impetus for USD to gain. Even if the numbers are poor and we see USD weaken, we feel this will just be an opportunity for markets to buy USD again at better levels ahead of President-elect Trump's inauguration.
GBP is starting the day pretty flat but, as mentioned above, markets are not positive. We feel further weakness is to come as GBP retreats from its recent highs against a range of currencies.
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