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More Pound weakness today following possible negative employment data?

More Pound weakness today following possible negative employment data?

Inflation data for the UK printed slightly weaker than expected yesterday. Year-on-year, CPI (consumer price index) showed a 0.3% price increase during April, down from the previous month, whilst Core CPI came in at 1.2%, also down from March. The market reacted to this almost immediately with Sterling weakening against both the Euro and the Dollar, but it pulled back some of its losses against the Euro throughout the day.

Today, the UK will have its unemployment data released at 9.30am. The claimant count is predicted to show a slight increase, with no change in the official unemployment rate of 5.1%. Given the current state of the UK economy and recent negative data trends, there is a chance that unemployment will be worse than expected. If so, a poor unemployment report would see a continuation of yesterday’s negative GBPUSD trend, likely pushing Cable (GBPUSD) below the 1.44 threshold.

The Euro ended up weakening against Sterling during yesterday’s European trading session as results from the European trade balance printed positively. The figures came in at €28.6 billion, which was higher than February’s figure of €19 billion. This was not enough to strengthen the single currency on the day, however, as it ended 0.3% weaker – it neared the 1.28 threshold versus the Pound. The single currency will look to bounce back as the Eurozone CPI looks to surpass last month’s figure of 0.8%. The CPI figures are used to measure inflation in the Eurozone as well as identify key purchasing trends.

The Dollar opens Wednesday notably stronger against the Euro and the Pound after comments from Fed officials suggested that a June rate hike could still be on the cards. The comments came after the US posted better than expected data, leaving the Dollar bulls to push the Greenback higher overnight. Industrial production grew 0.7% for April, well above consensus expectations of 0.3%. Also Headline inflation and core inflation rose month-on-month, suggesting that the US economy that is growing, which will no doubt please the Federal Reserve ahead of its June meeting.

GBPUSD had reached daily highs of just over 1.4500 in the morning, before the positive sentiment surrounding the Dollar began to claw back the losses over the remainder of the day. The Dollar opened this morning at 1.4462 against the Pound, gaining 0.45% from the highs due to the Fed comments and the stronger than expected data.

Data to watch: 9.30am UK Average Earnings Index, UK Claimant Count, UK Unemployment Rate. 10.00am European Final CPI. 7.00pm US Federal Open Market Committee (FOMC) Meeting Minutes.

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