Sterling Under Pressure On Delta Variant Fears
Sterling edged higher amid underlying optimism over the recovery outlook with the UK currency jumping higher against the Dollar after the US employment data, but there was further resistance on approach to 1.4200 and there was a retreat to 1.4160 at the US close while against the Euro pared losses around the 1.1640.
Markets continued to monitor developments surrounding the Delta variant in the UK as the number of infections continued to increase, but hospitalisation rates held at low levels. Sterling edges lower this Monday to trade below the 1.4130 against the US Dollar and 1.1610 against the Euro.
The unemployment rate in the US declined to 5.8% from 6.1% and slightly below consensus forecasts of 5.9% with the labour-market survey recording a solid employment gain. Average earnings increased 0.5% on the month with an annual increase of 2.0% from 0.4% previously which maintained some concerns over inflation developments.
The dollar dipped sharply following the data with an assumption that the data was not strong enough to trigger a shift in Federal Reserve stance. In this context, there were expectations that the yield structure would continue to undermine US currency support over the next few months with USD/EUR peaking just above 1.2180.
The Euro is currently fading after the Friday optimism and is now receding to the area of daily lows near 1.2150 against the Dollar.
The single currency starts the week on the back foot following Friday’s advance to the area beyond the 1.2200, all in response to the disappointing Payrolls figures for the month of May. Investors’ attention will soon shift focus to the ECB’s meeting on Thursday.