We can almost copy and paste this week’s daily commentary outlining action each day. Stocks up, dollar down, sterling pressing fresh post-Brexit highs and the euro is somewhere in the middle.. What Brexit? The pound seems to care very little about risks around ongoing negotiations or potential pitfalls that may arise. The dollar can’t catch a break and this morning comments from the US Treasury’s Steven Mnuchin suggesting the weaker USD is better for trade opportunities has sent the greenback into a further spiral.
The pound got a boost this morning, while positive Brexit sentiment was beginning to fade with EURGBP pressing higher yesterday, today’s release of labour market data helped sterling surge up .75% as wages grew by more than expected, up 2.4% vs 2.3% expected and thus narrowing the gap on eroding real earnings. Slightly weaker inflation and stronger wage growth providing a slight lift for the pound in recent weeks. Elsewhere data was more or less as expected with unemployment at 2.4%. Q4 GDP figures are due Friday, this has been the UK’s weak point and while there’s some recovery through the second half of last year, the UK still remains an underperformer vs most of its G10 peers. GBPUSD breaking towards 1.4100 area, above that 1.4115/20 provides resistance for sellers while 1.3895/1.3900 needs to give way as support to see any declines accelerate.
The euro is slightly weaker this morning, the single currency only trading higher vs the heavy USD. Weaker Eurozone manufacturing data not helping, but broadly PMI’s for the region remained firm and the composite reading was up to 58.6 vs 57.9 expected. Tomorrow’s ECB will be key however and the euro needs to see a very hawkish ECB in order to continue its advance. Should the ECB fail to alter their forward guidance or voice any signs of caution, then the euro will almost certainly be exposed to selling.