After soaring to a fresh year-high on Monday, the pound quickly lost its gains against the euro yesterday morning as UK jobless rate came in lower than expected.
However, sterling managed to make up most of its losses throughout the course of Tuesday and is currently just 0.15% shy of Monday’s high.
After a rocky month against the US dollar, the pound regained some strength yesterday and is currently trading 1.29% higher than this time last month and 2.8% higher than this time last year.
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There’s a flurry of economic data for the UK this morning, including GDP which grew by 0.2% in April 2023, matching market forecasts and rebounding from a -0.3% drop in March 2023.
Later today, the Federal Reserve is expected to keep the interest rate unchanged at 5.25% during the June 2023 meeting. This would mark the first pause in rate hikes following ten consecutive increases that lifted borrowing costs by 500 basis points.
On the data front, the US inflation rate declined to 4.0% in May 2023, from 4.3% in April. This is the lowest reading seen since March 2021 and was largely driven by a decline in energy prices.
New figures from Germany yesterday revealed the ZEW economic sentiment index rose to -8.5 from -12 in May. Despite the rise, the reading remained in negative territory and economists do not foresee an improvement in the latter half of 2023.
In a speech for the Bank of England, governor Andrew Bailey said that bank policymakers “were wrong” about the impact of the end of the furlough scheme on inflation.”
He continued, “We thought unemployment would rise, and we were wrong.”
Yesterday afternoon, data revealed that UK wages (excluding bonuses) increased by 7.2% in the three months to April. The Bank of England warned big pay rises are contributing to the UK’s still-high inflation.
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