GBP/USD trades at multi-year highs after strong employment data

United States Dollar:

The pound has been the darling of currency markets over the last 24 hours. It broke through 1.68 vs. the US dollar yesterday after UK employment data printed better than expected - the unemployment rate fell to 6.9%, the lowest rate in five years whilst other data showed that average earning rose above the rate of inflation for the first time quite some time. Although there isn’t any unemployment threshold in place any more, markets have been aggressively pricing in a BoE rate hike for April 2015. Should data continue to print as impressively as this over the next few months it’s possible that we’ll see the hike come earlier. Meanwhile risk sentiment improved throughout the day yesterday and US stocks pushed higher. There was some caution ahead of a speech by Janet Yellen but she didn’t say anything new – the Fed was committed to accommodation to support the recovery, that sort of stuff. The USD has continued to weaken overnight and cable now trades at multi-year highs at 1.6835. There’s no UK data up for release this morning. Markets will look to US unemployment claims and Philly Fed Manufacturing Index later on in the day. In the meantime the pound is likely to continue to be well supported owing to the data yesterday. We expect a range today in the GBP/USD rate of 1.6650 to 1.6760.

Euro:

EUR/USD was carried higher with GBP/USD yesterday morning following the strong UK employment report. It traded to a high of 1.3850 but then slowly lost ground during the afternoon. Sales in EUR/GBP and weaker than expected Core European CPI were the main drivers. March Eurozone inflation fell to its lowest level since November 2009 and its likely putting more pressure on the ECB to act. EUR/USD fell to a low of 1.3804 yesterday afternoon but it has slowly recovered in Asia, thanks in the main to a weaker USD, to open this morning at 1.3840. We expect a range today in the GBP/EUR rate of 1.2040 to 1.2135.

Aussie and Kiwi Dollars:

AUD/USD has been steady over the last day trading a range between .9335 and .9390. NZD/USD has pushed higher and opens this morning at .8625. It’s been a lacklustre last 24 hours for the commodity currencies, this as traders put their feet up ahead of the long weekend. In terms of data the NAB business confidence index fell in Q1 to 6, from 8 previously whilst NZ job ads for March came in at +1.1%. Neither release had much of an impact on rates. We expect a range today in the GBP/AUD rate of 1.7700 to 1.7890. We expect a range today in the GBP/NZD rate of 1.9250 to 1.9400.

Data Releases for the next 24 hours:

AUD: No data

EUR: No data

GBP: No data

NZD: No data

USD: Unemployment Claims, Philly Fed Manufacturing Index