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Sterling forges forward on strong jobs data

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Sterling forges forward on strong jobs data

The Pound continued to gain strength against the Euro as yields moved in favor of the UK currency on the heels of stronger than expected employment data.  When combined with the strong forward looking PMI surveys released last week, many believe the BOE is closer to tightening rates then easing potentially by the end of 2013.

On Tuesday, US President Obama took his case for military action against Basher al-Assad to the American people, with an address that discussed the issues of inaction.  It is clear that military force is likely on hold, and a vote in congress would probably fall short of siding with the President.  The President will now see if the Russians and the Syrians can push through a resolution that will task Syrian with giving up all of their chemical weapons while the Russians talk out of both sides of their mouth already saying that now one could expect Syria to give up all of its weapons as the country would be vulnerable against an attack.

In UK economic data, the claimant count queues declined 32.6K in August, which was a greater decline than expected while the July drop was revised to 36.3k from 29.2k.  The unemployment rate declined to 7.7% from 7.8%.  Average weekly earnings, declined to 1.1% from the revised June figures, which reflects a decline in future inflation.  The jobs numbers are solid but wage inflation is non-existent.

The lack of wage growth might give the BOE the time it needs to keep tightening on hold as lack of increasing earnings will keep inflation in check. The recent strength of sterling conflicts with Carney’s forward guidance which could suggest that the BOE is closer to tightening than many think.

The EURGBP currency pair is on the ropes and testing support near the May lows at 08.8400.  A close below this level would likely lead to a test of weekly support near 0.8000.  Momentum is negative with the MACD printing in negative territory and the trajectory of the index point to lower prices.  The RSI is printing near 31, which his on the low end of the neutral range very close to the 30 oversold trigger level.

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