The pound has slipped below US$1.30 as it remains under pressure after easing back from a 10 day high in the previous session. The pound US dollar exchange rate dropped 0.34% to close on Monday at US$1.3005, a few points above the low of the day.
Pound Looks To Jobs Data
The pound slipped on Monday after Prime Minister Boris Johnson said that he was not looking for anything special in trade talks from the EU. Instead he is looking for a trade deal which is similar to one that exits. News of a standard trade deal rather than a bespoke deal was disappointing for pound investors and the pound dipped. Fears of a no trade deal Brexit continue to weigh on sterling this morning.
Investors will now look ahead to UK employment data due later today. The UK labour market has shown resilience, even as the UK economy has stumbled in 2019. Strong job creation and healthy wage growth is important because it means that, with today’s low inflation, households have more to money in real terms. Under these circumstances’ workers spend more, which is good news for the UK’s consumer driven economy.
Analysts are expecting that resilience to continue, although Brexit uncertainty has dragged on consumer spending. Unemployment is expected to remain steady at multi decade lows of 3.8%. Wages are expected to grow 3% in the three months to December, slightly lower than the 3.2% recorded in November. A weak reading could see the pound extend losses from the previous session.
US Dollar Underpinned By Safe Haven Status
The dollar started the week on a quiet note as investors welcomed efforts by China to support the Chinese economy through lower borrowing rates and short-term funding to banks. However, the number of covid-19 cases has surpassed 71,000 and the death toll 1775. As the number continue to grow, the markets will remain jittery which analysts expect to underpin the safe haven dollar.
The US economic calendar is relatively quiet this week. There were no high impacting US releases on Monday and there aren’t any influential releases today either. Investors will look ahead to Wednesday’s unveiling of the minutes to the Federal Reserve monetary policy January meeting. That said market participants aren’t expecting any fireworks there either, given that the Fed has reaffirmed its position on monetary policy several times over recent weeks.
