FX round-up: Sterling flops as traders react to UK employment data

By Andrew Schonberg

Date: Wednesday 15 Feb 2017

FX round-up: Sterling flops as traders react to UK employment data

(ShareCast News) - Sterling flopped against most key crosses on Wednesday evening, with the already Brexit-devalued currency taking a welter of blows as traders adjusted their positions on the back of UK employment data out earlier.
At roughly 17:30 GMT, sterling was down 0.17% to $1.2447, and down 0.37% to €1.1743. The dollar-spot index tapered 0.22% to $101.030.

The British issue was also softer against the currencies of Australia, Canada, New Zealand, South Africa and Japan. Its widespread softness did help the FTSE 100 higher, however.

Chris Beauchamp, chief market analyst at IG, said Wednesday morning's employment and wage figures provided a further blow to the already tottering pound.

Official data showed that while the UK's headline jobless rate held at 4.8%, as expected, the country's wage growth surprisingly slowed in December as the labour market slightly improved.

"Despite more good job numbers, weakness in wage growth reinforces the message that UK households face a looming income squeeze that bodes ill for consumer spending," said Beauchamp.

"Retail sales later this week might hold up well, but the longer-term picture is quite bleak."

Michael Hewson, chief market analyst at CMC Markets UK, said the less-than-expected wage rise gave much more "latitude to the Bank of England to simply sit on their hands," referring to future monetary policy.

Meantime, the US dollar had a mostly torrid time on key crosses, falling against the euro, aussie, kiwi, rand and yen, but managing a limp rally against the loonie.

On Wednesday afternoon, the US consumer-price index sped past forecasts in January, with the key measure of 'core' inflation coming in significantly ahead of market views.

This after US Federal Reserve chair Janet Yellen on Tuesday issued a surprisingly hawkish tone in testimony before a Senate committee. The market has interpreted Yellen's words as indicative of a possible US rate hike in March, although that was by no means a certainty.

Richard de Meo, managing director, said Yellen's testimony had encouraged markets to focus on US inflation and employment data as a direct guide to upcoming Fed policy decisions.

"Today's strong CPI print -- a 47-month high -- now provides the finishing touch to a hawkish adjustment to US rate expectations completed this week," de Meo said in a statement.

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