Sterling is not for the faint hearted – 15th Sterling 2016

Sterling is not for the faint hearted

Trying to make money from buying and selling Sterling is not for the faint hearted. The most uncontrollable of currencies has a history of doing the unpredictable and coming back to bite the hand that feeds it. Yesterday was such a day.

Investors had been expecting Wednesday morning’s UK jobs data to show unemployment steady at 4.9%, a small increase in the number of jobseekers and a 2.1% rise in average earnings and that was pretty much what they got. Moreover, the number of people in work was the highest ever and the 74.5% employment rate was the highest since the calculation was first made in 1971.

Despite the overall positive nature of the numbers Sterling had started to move lower by lunchtime. Around 3pm though, the tables turned, Sterling regained the half cent it lost to the US Dollar and Euro to end the day 0.3% higher, on average, against the other dozen most actively-traded currencies.

The worst performers yesterday were the Canadian, Australian and New Zealand Dollars. Canada’s problem was a -3% fall in oil prices; Australia’s was a poor set of employment data and the Kiwi just followed the Aussie. In the last couple of weeks a nervousness has emerged in financial markets, stemming from a suspicion that quantitative easing on a grand scale from central banks has run its course. Those worries have pushed bond yields higher and undermined the price of shares and commodity-related currencies. In the last 24 hours the Canadian Dollar has lost a cent and a half and the Aussie a cent and a quarter to Sterling. 

Today the Bank of England MPC meet to discuss interest rate policy in the UK; it would be astonishing if they were to alter monetary policy today so the main event will be the minutes of the Monetary Policy Committee. Anything other than a 9-0 vote against a further rate cut would hurt Sterling. Other than the MPC, this is afternoon’s US retail sales figures will be important to the US Dollar.