Pound up as unemployment falls

19 December, 2013

Graham Harborne

Regular readers will be aware that as we have entered the festive season markets have been quite subdued and the recent rally in the pound had tailed off, in fact the pound has been slowly losing ground against most of the majors. There really wasn’t anything in the pipeline to suggest this would change and we would have expected rate to remain subdued as traders unwound positions before the Christmas break.

How wrong we were…

Yesterday was hugely volatile with the pound and in many ways the USD being the big winner and yes you guessed it the loser was the euro. We have been saying for weeks now that between the 3 majors there always seems to be one that is really struggling, the pound has had its turn and things look bleak for the euro, for the short term at least. Nothing to drastic in the way of bad eurozone news though a few data releases yesterday did miss the mark but it was the surprise in the UK unemployment figures that saw the pound rise. Unemployment has been steadily falling over the past few months and stood at 7.6% which many experts expected to remain unchanged. However it seems with Christmas looming jobs were being created and taken at a much faster rate and unemployment fell further to 7.4% (its lowest level since 2009) which helped the pound gain nearly 1 cent.

Things remained stagnate in the afternoon and then the fed released its bombshell to the economic world. Sighting an improvement in the economy they shed $10 billion a month from their current $85 billion bond buying programme and this helped the pound further as well as giving the dollar a welcome boost. It just goes to show that even in the so called quiet periods unexpected data releases or announcements can move the markets in a big way.

Today we have UK retail sales and a string of data from both Europe and the States. It is unlikely we will see the movements we saw yesterday but if you do have any pending requirements please make sure you keep in touch with your account manager here at Currency Index.