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Sentiment strong around GBP

Sentiment strong around GBP

Friday’s unemployment data in the US was mostly disappointing, with the economy creating barely 169K new jobs. The unemployment rate decreased to 7.3%, the lowest level in several years but perhaps not enough for the market to see significant tapering in the US and hence USD remains on the back foot. GBP/USD staying comfortably above 1.5600.

Weekend are normally extremely quiet for economic data, however, the Australian election on Saturday produced a new Government, with a few different policies that may have an impact on the AUD in the longer term, if the promises are kept. The incoming Government is likely to reduce the fiscal deficit ever so slightly more quickly than the outgoing Government and there may be negative effects on the economy from this increased fiscal drag. This may be offset by a boost in confidence. Coupled with last week’s RBA meeting, confirming AUD interests would stay on hold at 2.50%, the new political backdrop in Australia has already strengthened the Aussie Dollar with GBP/AUD falling back below 1.700.

The first big event of the week will be GBP employment figures on Wednesday. While the UK data has been pretty encouraging lately, showing signs of economic growth particularly when it comes to manufacturing and housing sectors, employment figures had remained subdued, in steady low levels. The unemployment rate remains at 7.8%, still well above the 7% rate target set by the Bank of England. Remember, under Mark Carney’s forward guidance philosophy,  the MPC will not consider raising interest rates until the unemployment rate falls below 7%.

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