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GBPUSD above 1.4050, GBPEUR above 1.1570

GBPUSD above 1.4050, GBPEUR above 1.1570

GBP

Sterling held steady on Friday despite caution ahead of the US employment report. A strong performance by the Conservative Party in local elections provided some support to the Pound. The UK Construction Purchasing Managers Index decreased fractionally and failed to meet forecasts, although new orders increased and  supply-chain shortages continued to provide upward pressure on costs.

Bank of England Deputy Governor Ben Broadbent stated that the “downside risks are less pronounced”, but policy will only change with evidence of a sustainable return to the inflation target. Sterling hovered close to 1.3900 ahead of the US jobs report before surging to highs near 1.3970 following the disappointing data and went on to test 1.4000 in late trading while the Euro settled just below 1.1500.

The Scottish parliamentary elections were dominated by the pro-independence parties, but the SNP fell just short of an overall majority. Another Scottish independence referendum will come into play in the long term but the Conservative gains across England provided net relief for the Pound and should allow markets to refocus on the economic recovery. 

At market open today risk appetite holds firm, which allowed the Pound to break above 1.4000 to the Dollar, which triggered further buying to 1.4050. The Euro opens near 1.1560 and there is no tradable tier one data today as retail sales arrives near midnight.

 

USD

There was a very big miss on the headline US employment report with the increase in non-farm payrolls held to 266,000 for April compared with consensus forecasts of an increase close to 980,000. The March increase was also revised down to 770,000 from the original figure of 916,000. Private-sector payrolls increased 218,000 on the month after a 708,000 gain previously. There was a decline in manufacturing jobs of 18,000 for the month while construction jobs were unchanged. There were also declines in transport and professional services jobs on the month with major surprise over the data. There were some suspicions that there were problems with seasonal adjustment for the data given that the survey evidence has consistently indicated that job creation has been strong over the past few weeks.

Unemployment increased to 6.1% from 6.0% and compared with market expectations of a decline to 5.8% as the participation rate increased slightly. The household survey recorded an increase of 328,000 in the number of employed as the participation rate edged higher.

Given that the Federal Reserve (Fed) has focussed strongly on securing maximum employment, the data will maintain expectations that the central bank will maintain an aggressive monetary policy. In this environment, the dollar was unable to regain ground and remained under pressure into the New York close.

 

EUR

The Euro begins the week on the up and close to its highest levels since February 26 against the Dollar. 

European Commission President Ursula von der Leyen announced on Saturday that the EU had struck a deal with BioNTech/Pfizer for up to 1.8 billion extra doses of their Covid-19 vaccine. Late last week, the bloc leader also mentioned they would aim to vaccinate 30 Europeans every second. The old continent has been criticized for a slow start to the vaccinations and jab jitters with the UK.

As of writing, the Euro currently trades around the 1.2150 against its US counterpart.

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