UK unemployment figures sees pound surge FOMC minutes weaken USD

19 February, 2015

Matthew Boyle

In what has been a relatively pedestrian start to the trading week, with many major crosses remaining relatively stable and range bound yesterday’s trading and in particular the mornings release of UK unemployment data started to spice things up again. Earlier this week the UK inflation figures had seen the pound stagnate a little against the majors, particularly against the Euro following last month’s stellar gains with its losing some ground which was no surprise given its recent surge. However yesterdays unemployment data showed a reduction in the claimant count by 38.6k from a predicted 25k and as a result the pound rallied. Throughout the day it gained 1.5 cents against the single currency and a cent against the greenback – hitting a new high for the year against the Euro and stealing back some of the recently lost ground against the currently strong dollar. In fact across the board the pound gained for those buying foreign currencies but of course still the pair most closely watched is GBP>EUR. Interestingly though with a new year high being reached the rate quickly dropped back by almost half a cent so demonstrating large levels of resistance, and the fact that a big push is still required for GBP>EUR rates to improve further. Words of caution for any of you who may be holding out still for further improvements, particularly with the ongoing Greek situation seemingly fast approaching a stalemate.

Interestingly yesterday there were indications of the current concerns over the uncertainly with the Greek/Eurozone situation as EUR weakness allowed USD strengthened against it amidst a raft of poor data releases. In the afternoon the US released production data, building permit and housing data all came in under expectation, but despite that throughout the day the dollar stole half a cent – demonstrating the slightly negative sentiment for the Euro at present coupled with Dollar strength. However this was relatively short-lived as the evenings data release- the highly important FOMC minutes – showed that there would be no rush to raise U.S interest rates, with the minutes showing no taste from any of the members to raise interest rates any time soon and “had inclined them towards keeping the federal fund rate at its effective lower bound for a longer period of time. Given that there has been much speculation about an interest rate hike this almost immediately pushed weakness to the USD, and by open this morning had lost around a cent against both GBP and EUR, whilst seemingly also releasing some pressure on the weak Euro allowing it to claw back a cent against GBP.

Today’s trading is quiet for UK data, however we do have action from the majors as we see ECB monetary policy accounts in the morning and US jobless and manufacturing data in the afternoon.

Take note, the U.S had been strongly linked with an interest rate hike and this delay may well now have seen tables turn slightly in the short term not only for USD rates but may have released some much needed pressure on the EUR. Given what was seen yesterday if the USD continues to weaken and without further positive data this will only encourage EUR strength and so against the pound we may will see rates slip back again as we have done several times previously.

So any of you who have been holding off for Euro buying rates may like to act now to secure a rate, during what may be a short-lived spike in the market and before perhaps the tables turn.

Speak to your Currency index broker for some friendly and professional guidance on how to get the most out of your transfer.