Forex Today: Pound rises on upbeat employment data, US Dollar retreats as yields turn south
Here is what you need to know on Tuesday, October 20:
The British Pound gathers strength against its major rivals early Tuesday following the upbeat labor market figures, while the US Dollar (USD) struggles to find demand as US Treasury bond yields fail to build on Monday's rebound. Later in the European session ZEW sentiment data for Germany and the Eurozone will be watched closely by market participants. In the second half of the day, the US economic calendar will feature Housing Starts, Building Permits and Pending Home Sales figures for September.
Pound Sterling Price Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.17% | -0.36% | -0.24% | -0.24% | -0.27% | -0.44% | -0.15% | |
| EUR | 0.17% | -0.22% | -0.05% | -0.07% | -0.08% | -0.27% | 0.02% | |
| GBP | 0.36% | 0.22% | 0.17% | 0.14% | 0.15% | -0.07% | 0.23% | |
| JPY | 0.24% | 0.05% | -0.17% | -0.01% | -0.01% | -0.23% | 0.08% | |
| CAD | 0.24% | 0.07% | -0.14% | 0.01% | -0.01% | -0.20% | 0.09% | |
| AUD | 0.27% | 0.08% | -0.15% | 0.01% | 0.01% | -0.20% | 0.11% | |
| NZD | 0.44% | 0.27% | 0.07% | 0.23% | 0.20% | 0.20% | 0.30% | |
| CHF | 0.15% | -0.02% | -0.23% | -0.08% | -0.09% | -0.11% | -0.30% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
The UK's Office for National Statistics reported on Tuesday that the ILO Unemployment Rate declined to 4.7% in the three months to August from 4.9%. This print came in better than the market expectation of 4.9%. In this period, the Employment Change was 102K, compared to 67K previously, and the annual wage inflation, as measured by the change i the Average Earnings Excluding Bonus, rose to 3.7% from 3.6%. Following the employment data, GBP/USD gathered bullish momentum and was last seen trading near 1.3350, rising about 0.4% on the day. Reflecting the broad-based GBP strength, GBP/JPY gains about 0.2% and trades at ist highest level in a month at 211.20, while EUR/GBP loses 0.2% and trades near 0.8400.
After starting the day under modest bearish pressure, the US Dollar (USD) Index staged rebound and closed virtually unchanged on Monday, supported by the recovery seen in the US Treasury bond yields. Early Tuesday, the 10-year US yield retreats toward 5.1% and the USD Index stays in negative territory below 101.80.
EUR/USD struggled to gather recovery momentum despite the renrewed USD weakness and trades below 1.1250 in the European morning on Tuesday.
Euro volatility risk rises as ECB dilemma over France comes into focus
Analysts at Rabobank argue that the current turmoil in France leaves the Eurozone facing a stark policy dilemma. They frame the choice as a “whispered realpolitik binary” between “the European Central Bank (ECB) bailing France out if needed, at a cost to the Euro and the fury of Germany,” or refraining from support “at a cost to EU economic, political, and market stability.” Rabobank further questions whether “the ECB [could] bail everybody else out from French contagion and leave Paris to sort out its mess,” underscoring the potential for spillovers across the bloc. In their view, “whatever happens now, more volatility seems far more likely than a ‘reversion to mean’,” reinforcing the sense that markets will remain highly sensitive to any escalation in French risks and the ECB’s response.
During the early trading hours of the Asian session, the People’s Bank of China (PBOC), China's central bank, announced that it left its Loan Prime Rates (LPRs) unchanged, with the one-year and five-year LPRs holding steady at 3.00% and 3.50%, respectively.
USD/JPY stays on the back foot on Tuesday and declines toward 158.00 after closing in the green on Friday. Japanese Finance Minister (FM) Satsuki Katayama said on Tuesday that there are no decisions made on funding expected defense spending increase. Katayama added that the government will consider measures to ensure stable funding while focusing on fiscal sustainability.
USD/CAD declines for the fourth consecutive trading day on Tuesday and trades below 1.4100, losing about 0.2%. On Monday, the data from Canada showed that the Consumer Price Index increased by 0.1% on a monthly basis in September. This print followed the 0.1% decline recorded in August and came in below the market expectation of 0.2%.
Gold remained under modest bearish pressure on Monday as US yields rose and registered daily losses. The precious metal finds it difficult to attract buyers early Tuesday and trades below $4,150 amid a reescalation of geopolitical tensions in the Middle East.
Iran’s Islamic Revolutionary Guard Corps (IRGC) said on Monday that Tehran has not yet completely closed the Strait of Hormuz and can expand the scope of the blockade to the Bab al-Mandeb Strait and the Suez Canal, Tehran Times reported.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
