In Daily Currencies Ratings 20/07/2016
The pound climbed from a one-week low as a report showed the U.K. unemployment rate fell below 5 percent for the first time since 2005.
Sterling gained versus all except one of its 16 major peers as data showed the U.K. jobless rate, as measured by International Labour Organisation standards, dropped to 4.9 percent in the three months through May. The median forecast in a Bloomberg survey of economists was for an unchanged reading of 5 percent.
The U.K. currency weakened Tuesday even as data showed annual inflation accelerated more last month than analysts forecast. As with the consumer-price numbers, the labor reports do not fully capture the period since Britain voted June 23 to leave the European Union.
Surveys tracking output among U.K. services and manufacturing industries, as measured by purchasing managers, which are due on July 22 “will be very, very important as this will be one of the first data point which will reflect the post-Brexit mood,” according to Petr Krpata, a London-based foreign-exchange strategist at ING Groep NV.
The labor reports are “pre-Brexit data points, so markets should discount them,” Krpata said before the numbers were published. “In a sense they will give you information which doesn’t reflect the current state of affairs.”
Pound Gains
The pound rose 0.3 percent to $1.3144 as of 9:45 a.m. London time, after falling earlier to $1.3065, the lowest since July 12. Sterling gained 0.4 percent to 83.76 pence per euro.
ING’s Krpata said he remains bearish on the pound and predicts it will slide to $1.23 in the next three months.
Eimear Daly, a G-10 currency strategist at Standard Chartered Plc in London, said that traders will focus on British Prime Minister Theresa May’s visit with German Chancellor Angela Merkel ,where she is expected to discuss Britain’s official exit from the EU and trade deals.
“Any kind of signs you would be able to have something in place before we officially exit the EU will be sterling supportive,” Daly said.
Source: Bloomberg
