USD weakness due to slowdown in labour market

GBP

This week has seen Sterling gain and lost ground against the US dollar after strong US jobs data release. Yet higher unemployment data rising 0.2% indicated a slowdown in the US labour market, resulting in dollar weakness.

Yesterday saw the EU year-on-year Retail Sales data reported at -0.6%, which was lower than the expected contraction of -1.3%. The euro has benefited from the recent dollar weakness as the pair EUR/USD has appreciated 2.5% in the last week.

All in all, the pound has been the best performing major currency this week recovering losses from last week’s Bank of England’s rate hike decision that saw the pair GBP/USD tank 2% shortly after the dovish commentary stating that “market expectation of 5.25% interest rates would lead the UK economy into an eight-quarter long recession”.

As the pound continues to remain sensitive to global sentiment, markets will be keeping a close eye on Thursday’s US CPI print which is projecting a 0.2% contraction. This should support the Federal Reserve’s strategy to begin slowing down the rate hiking cycles. However should the CPI print report stronger than expected, we will most likely see USD strength.

Key announcements

10:00 – EUR – ECB’s Elderson speaks

10:30 – EUR – German 10-Year Bund Auction

13:00 – GBP – MPC member Haskel speak