The pound rose against both the US dollar and euro on Wednesday, for the second straight day, after better than expected employment data on Tuesday gave sterling a much-needed boost. Figures published by the Office for National Statistics on Tuesday morning revealed a 208,000 rise in the number of people in work in the three months to November, with the unemployment rate staying at 3.8%; its lowest since the 1970’s.
As a result, the pound made steady gains against its two main counterparts, the euro and the US dollar, climbing against both currencies well into Wednesday afternoon. The robust employment numbers have cast doubt over whether the Bank of England will cut interest rates on the 30th January and the pound has risen against most of the other major currencies. As a general rule, a currency will weaken when the corresponding interest rate is cut and recent speculation over loosening monetary policy has ensured a rocky start to 2020 for the UK currency.
There are no significant data releases from the UK on Thursday so we may see a continuation of this recent trend of sterling strength. However, Friday’s PMI numbers will be eagerly anticipated and softer than expected data will fuel speculation over a rate cut and could wipe out sterling’s recent gains.