Will Unemployment Figures Knock The Strong Pound

16 May, 2012

Tom Arnold

Last month unemployment was slightly improved, but while it is expected to be unchanged today, claimant counts are expected to be higher, which could signal a drop off from the highs we have seen for the Pound in the last few days. Against the US Dollar, expectations together with a bit of an overall sell off have already brought Sterling below the psychological level of 1.60, with concerns things could get worse:

“GBP/USD has reacted lower, breaking below the 2012 uptrend. Failure here leaves the market more vulnerable to a sell off to the 1.5830/1.5768 region”, wrote Commerzbank analyst Karen Jones.

Any Dollar buyers should probably think about securing now, before this potential drop is realised.

The Sterling to Euro rate is still holding close to the 3.5 year highs, due to the continuing concerns over what is happening all across Europe – highlighted further yesterday by the announcement that Greece will definitely face a new round of elections in the coming months, following the failure of the election 2 weeks ago to install a new government. However European GDP was static yesterday, showing the Eurozone has avoided going into an overall recession, as the UK has, and with CPI inflation data out this morning, it is entirely conceivable, with some more good data, we could see the Euro make some gains back against the Pound, especially if UK unemployment pans out as expected. I don’t expect this to be the beginning of a big slide, but if you are buying Euros and you want to be close to those highs, then now is the time.